US Treasury yields barely moved at the latest close, holding the previous week’s rally as the Federal Open Market Committee opens its two-day meeting in Washington. The 10-year yield was down 0.2 basis points at 4.99 percent, a third consecutive close at or below 5 percent. The five-year rose 1.9 basis points to 4.82 percent and the 30-year fell 1.4 basis points to 5.30 percent.
The weekly picture is the story. Yields are down 10.5 basis points at five years, 15.0 at ten years and 17.1 at thirty years on the week, a bull flattening led by the long end. That is duration being bought into a meeting at which a hold at 3.75 to 4.00 percent is priced above 90 percent, not sold ahead of it. Monday’s edition set out the tension: Goldman Sachs expects the committee to skip October and deliver a second and final hike in December, against market pricing closer to four hikes through next September.
Currencies moved more than bonds. The dollar index rose 0.27 percent to 102.23, the euro fell 0.66 percent to 1.1143 dollars and the yen weakened 0.58 percent to 157.74 per dollar, two days before the European Central Bank’s decision on Thursday and three before the Bank of Japan’s on Friday. Sterling fell 0.45 percent to 1.3318 dollars ahead of Wednesday’s UK Autumn Budget.
What decides the week is now sequential. The FOMC statement lands Wednesday at 14:00 ET, the Bank of Canada decides the same morning, and Thursday brings the advance estimate of third-quarter US GDP and September core PCE inflation, the data the December pricing depends on. With the long end already 15 basis points richer on the week, the statement’s December language has to be hawkish merely to hold yields where they are.