UST rates continue to drift lower, 10yr rate down 1 bps to 2.20%; speculators are long the US 10yr futures and with rates close to their year-to-date low, the market is backing that Fed will back down from its policy guidance on rate hikes

By Jason Wong

US Treasury rates continue to drift lower, with the 10-year rate down 1bp to just under 2.20%.  The chartists will be eyeing up the 2.16% level, which is the low for the year reached mid-April and the 200-day moving average. 

With speculative net long positioning in 10-year futures not seen for a decade and rates close to their year-to-date low, the market is backing the view that the US Fed will ultimately back down from its policy guidance of a series of rate hikes through to end-2019. 

The recent dataflow might well be supportive of that view for now, but if recent weakness in inflation does prove to be temporary then there could be an unwelcome sell-off for traders later in the year.

With the tailwind of falling global rates, yesterday NZ long term rates reached fresh lows for the year, with 5 and 10-year swap rates closing at 2.705% and 3.19% respectively.  It’s another full economic calendar ahead, with focus on tonight’s US ADP employment and ISM manufacturing data.

Daily swap rates

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1 year %2 years %3 years %4 years %5 years %7 years %10 years %
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Source: Westpac

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Source: Westpac

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Source: Westpac

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Source: Westpac

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Source: Westpac

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Source: Westpac

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Source: Westpac


Jason Wong is on the BNZ Research team. All its research is available here.