The rebound in the US Treasury bond market came to an abrupt end after a Federal Reserve official mentioned the possibility of raising interest rates.
In response to a question at a meeting in Washington, New York Federal Reserve President John Williams said that another rate hike was not his basic expectation. But he added, “If the data reminds us that we need to raise interest rates to meet our goals, then we obviously want to do that.”
The yield on 2-year treasury bonds once rose 5 basis points to around 4.99%, close to the high end of the recent fluctuation range.
“US Treasury yields have taken a turn and have risen to the level of a few months ago,” Aoifinn Devitt, chief global market strategist at Moneta, said on television.
Faced with strong economic data and statements from Federal Reserve officials, Wall Street fund managers and strategists have had to rethink their assumptions about interest rate prospects over the past two weeks.
On Thursday, the swap rate market predicted that interest rates would be cut by a total of 38 basis points until the December meeting, less than the 43 basis points forecast at the close of Wednesday. The forecast for a 25 basis point cut in interest rates in November still exists.
However, the probability of interest rate hikes reflected in market prices is still close to zero.
According to the data, the US Treasury bond index has accumulated a cumulative decline of nearly 2% so far this month, completely recovering the 1.3% increase in March.
However, some Wall Street people, including J.P. Morgan Asset Manager Kelsey Berro, believe that rising yields provide buying opportunities. In fact, investors flocked to subscribe to 20-year treasury bonds on Wednesday.
She said, “We think the further increase in yield is limited because the Federal Reserve still thinks it has done enough.”