How Long Before The Fed Tries To Manipulate Long-Term Rates Lower?
The Fed pledged to hold interest rates low for a very long time. What about the long end of the curve?
Yields Reveal a Mini-Revolt On the Long End
3-Month Yield: 0.04%
1-Year Yield: 0.06%
2-Year Yield: 0.11%
3-Year Yield: 0.20%
5-Year Yield: 0.50%
10-Year Yield: 1.20%
30-year Yield: 2.01%
US 30-year yield back to a 2-handle. Highest since Feb 19 (so a new post-pandemic high)
Among the developed markets, only the mighty 30-year Aussie has a higher yield. pic.twitter.com/VPYcOKaA7H
— Jim Bianco (@biancoresearch) February 12, 2021
Yield Curve Dramatically Steepens
In July of 2018 the spread between the spreads was only 12 basis points with the 2-30 spread at 38 basis points and the 2-10 spread at 26 basis points.
The 2-30 spread at 1.83 is higher than any time since February 10, 2017.
The 2-10 spread at 1.07 is higher than any time since April 7, 2017.
Fed Losing Control of Long End
On February 8, the Fed noted Monetary Policy Will Stay Accommodative For a Very Long Time. I commented “Like Forever”.
On February 10, in a speech on the labor market Powell said the True Unemployment Rate is Actually 10%
In Powell’s speech, he reiterated the message rates would stay low.
But spreads have widened dramatically which begs the question:
How long before the Fed openly intervenes to push rates lower on the long end of the curve?
Mon, 02/15/2021 – 09:38