'Any notions of fed easing this year are way overdone'
NEW YORK (Scrap Register): Any market expectations of the Federal Reserve cutting interest rates this year are “overdone,” with Treasury yields ticking higher, said Brown Brothers Harriman.
“The U.S. economy looks to be in much better shape this year than previously thought,” BBH added. That in turn has pushed U.S. interest rates back up. Today’s 10-year yield of 2.61% is the highest since March 20, likewise for the two-year yield of 2.42%.
The three-month to 10-year curve has steepened to 19 bp [basis points], the steepest since March 14, as the U.S. bond market is finally catching up to the U.S. equity market in signaling reduced recession risks.
“Indeed, we believe that any notions of Fed easing this year are way overdone. When market expectations readjust to a less dovish take on the Fed, the dollar rally should gather more steam,” BBH noted.