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-yearYield: 2.01%
Yield Curve Dramatically Steepens
Notes
- 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 Feb. 8, the Fed noted Monetary Policy Will Stay Accommodative For a Very Long Time. I commented "Like Forever".
- On Feb. 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?