“With extremely low and negative bond yields outside of the United States, we believe that USA rates will remain relatively attractive”, Guggenheim’s interest rates team, led by senior managing director Connie Fischer in Santa Monica, Calif., wrote.
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New York Fed President William Dudley, who said on August 16 that a hike was possible as soon as September, reaffirmed that view Thursday, saying GDP growth will “be quite a bit stronger” in the second half of 2016.
Federal Reserve Bank of New York President William Dudley on Thursday expressed confidence in US economic growth and labor market strength in the second half of the year, which could push the officials to move. Officials have twice cut projections for the path of increases as economic weakness and market volatility undermined efforts to tighten policy while central banks overseas add to easing measures.
The 10-year note yield was little changed at 1.56 percent as of 9:55 a.m.in London, after declining three basis points Wednesday, according to Bloomberg Bond Trader data. The price of the 0.75 percent security due July 2018 is 100 2/32.
Yields on French and Italian bonds are also near record lows, although Portuguese debt bucked the trend: The yield on its 10-year note climbed to 2.982%. “So, it seems when the hawks talk up the possibility of a hike, the market discounts it as just trying to get more priced in to give themselves the option to hike rather than actually being interested in hiking”. “There is room for the Fed to maneuver but not as much as people might think because the neutral rate of interest is somewhat lower than people think”, he said.
Recent rhetoric from Fed officials has contrasted with the minutes of the July Federal Open Market Committee meeting released on Wednesday, which showed members divided on whether a rate increase was needed in the near future.
“I think the market assessment of the Fed’s interest-rate path is a correct one”, said Daniel Lenz, market strategist at DZ Bank AG in Frankfurt.
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Brent crude traded at $50.63 a barrel on Friday, down 0.51 percent, while US crude was unchanged at $48.19 a barrel, down 0.04 percent. The “Fed comments were mixed, and the minutes pointed to the fact that the picture in the labor market is still uncertain”.
