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16 Jan 2015
Falling yields threaten USD rally
FXStreet (Mumbai) - The yields at the short-end as well as the long-end of the Treasury curve have been falling sharply due to falling inflation expectations and a race to a looser monetary policy across Europe and Asia.
At the time of writing, the 10-year yield traded 7.1 basis points lower at 1.704%, The 30-yr yield, which fell to record lows on Wednesday, traded 4.9 basis points lower at 2.362%. Meanwhile, at the short-end of the curve, the 2-year yield weakened 3.6 basis points to 0.408%.
The 10-year yield in the US has declined sharply from the high of 2.4% see in early November 2014 to the current level of 1.704%. In the initial stages, the slide was mainly fueled by falling inflation expectations due to lower energy prices.
However, the Swiss National Bank’s (SNB) decision to move interest rates into the negative territory in mid-December, with further reduction announced yesterday added fuel to the fire. Increased speculation regarding the size of ECB’s QE also pushed yields lower.
Sharp decline in the treasury yields may push US dollar lower across the board. So far the USD index continues to trade around 92.50 levels. However, a weak US CPI print today may trigger a further slide in the Treasury yields, thereby weakening the US dollar.
At the time of writing, the 10-year yield traded 7.1 basis points lower at 1.704%, The 30-yr yield, which fell to record lows on Wednesday, traded 4.9 basis points lower at 2.362%. Meanwhile, at the short-end of the curve, the 2-year yield weakened 3.6 basis points to 0.408%.
The 10-year yield in the US has declined sharply from the high of 2.4% see in early November 2014 to the current level of 1.704%. In the initial stages, the slide was mainly fueled by falling inflation expectations due to lower energy prices.
However, the Swiss National Bank’s (SNB) decision to move interest rates into the negative territory in mid-December, with further reduction announced yesterday added fuel to the fire. Increased speculation regarding the size of ECB’s QE also pushed yields lower.
Sharp decline in the treasury yields may push US dollar lower across the board. So far the USD index continues to trade around 92.50 levels. However, a weak US CPI print today may trigger a further slide in the Treasury yields, thereby weakening the US dollar.