{"id":4184,"date":"2023-05-04T13:57:18","date_gmt":"2023-05-04T17:57:18","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/two-year-treasury-yield-falls-below-3-9-as-market-and-fed-diverge\/"},"modified":"2023-05-04T13:57:18","modified_gmt":"2023-05-04T17:57:18","slug":"two-year-treasury-yield-falls-below-3-9-as-market-and-fed-diverge","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=4184","title":{"rendered":"Two-year Treasury yield falls below 3.9% as market and Fed diverge"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002009308\" role=\"document\">\n<p>The policy-sensitive 2-year Treasury yield drifted lower on Thursday, a day after the Federal Reserve lifted interest rates for the 10th time, in a divergence which may reflect the market\u2019s view that policy makers are committing a policy error. <\/p>\n<div class=\"paywall\">\n<h6>What\u2019s happening<\/h6>\n<ul class=\"articleList\">\n<li>\n      The yield on the 2-year Treasury<br \/>\n        TMUBMUSD02Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">3.755%<\/bg-quote><br \/>\n       was 3.871%, down from 3.939% on Wednesday. <\/p>\n<\/li>\n<li>\n      The yield on the 10-year Treasury<br \/>\n        TMUBMUSD10Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">3.348%<\/bg-quote><br \/>\n       was little changed at 3.392% from 3.401% on Wednesday afternoon.<\/p>\n<\/li>\n<li>\n      The yield on the 30-year Treasury<br \/>\n        TMUBMUSD30Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">3.727%<\/bg-quote><br \/>\n       was also little changed at 3.715% versus 3.713% as of late Wednesday.<\/p>\n<\/li>\n<\/ul>\n<h6>What\u2019s driving markets<\/h6>\n<p>The 2-year Treasury yield was headed for its third straight decline in as many sessions as of Thursday morning, a sign that historically has signaled the view by traders that the Fed is making a policy mistake. <\/p>\n<p>U.S. regional banks remain in focus as shares of PacWest Bancorp\u00a0<br \/>\n        PACW,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/205622697\/composite\" class=\"negative\">-43.31%<\/bg-quote><br \/>\n       tumbled on Thursday, taking other bank stocks with it. The prospects of further stress in the bank sector had fed funds traders pricing in a 100% likelihood that the Fed will cut interest rates by December, despite Chairman Jerome Powell\u2019s comments on Wednesday to the contrary. <\/p>\n<p> <strong>Read:<\/strong> Four things we learned from Powell\u2019s press conference after latest Fed rate hike<\/p>\n<p>As of Thursday morning, fed funds futures traders saw a small 6.6% chance that the first rate cut take place in June, while pricing in a 93.4% probability that the Fed will leave interest rates unchanged at between 5% to 5.25% next month, according to the CME FedWatch tool. The central bank is mostly expected to take its fed funds rate target back down to at least between 4.25% and 4.5% by December, according to 30-day Fed Funds futures.<\/p>\n<p>In U.S. economic updates on Thursday, initial weekly jobless claims rose by 13,000 to 242,000 at the end of April, a sign of softening in the labor market. The U.S. trade deficit fell 9% to a four-month low of $64.2 billion in March on shrinking imports, while first-quarter productivity fell sharply at a 2.7% annual clip as the economy slowed.<\/p>\n<p>The European Central Bank lifted interest rates by 25 basis points, slowing the pace of monetary tightening, and ECB President Christine Lagarde said that \u201cwe are not pausing, that\u2019s very clear.\u201d The German 10-year bund yield<br \/>\n        TMBMKDE-10Y,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.000%\" channel=\"\" class=\"\">2.189%<\/bg-quote><br \/>\n       rose 2.1 basis points to 2.273%.<\/p>\n<h6>What analysts are saying<\/h6>\n<ul class=\"articleList\">\n<li>\n      In the U.S., \u201cit is clear they are getting closer to the end of their tightening cycle, but he [Powell] was non-committal on a pause,\u201d said\u00a0Larry Kochard, chief investment officer at Makena Capital Management. \u201cIt seems likely that there will be a pause, but the markets may not see the size of rate cuts that are priced in through year-end.\u201d<\/p>\n<\/li>\n<li>\n      Citi \u201cprojects high inflation prints in the run-up to the June FOMC, and expects the Fed to hike rates at both the June and July FOMC \u2014 taking Fed fund rates to 5.5-5.75%,\u201d said economist Johanna Chua and others in a note. \u201cThe market\u2019s interpretation of the FOMC is different, especially with continuing concerns over U.S. regional banks. Market pricing suggests ~60% chance of a rate cut by the July FOMC and a cumulative 90 basis points of cuts by the end of this year.\u201d<\/p>\n<\/li>\n<\/ul><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/treasury-yields-move-higher-as-investors-parse-latest-fed-policy-update-11c81419?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The policy-sensitive 2-year Treasury yield drifted lower on Thursday, a day after the Federal Reserve lifted interest rates for the 10th time, in a divergence which may reflect the market\u2019s view that policy makers are committing a policy error. What\u2019s happening The yield on the 2-year Treasury TMUBMUSD02Y, 3.755% was 3.871%, down from 3.939% on [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1898,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-4184","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Two-year Treasury yield falls below 3.9% as market and Fed diverge | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The policy-sensitive 2-year Treasury yield drifted lower on Thursday, a day after the Federal Reserve lifted interest rates for the 10th time, in a\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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