U.S. Treasury yields and the dollar slides as Fed’s Clarida Cautions on Global Growth.
The Bloomberg Dollar Spot Index sank 0.5 percent and two-year Treasury yields dropped to the lowest since October after Clarida told CNBC that the Fed is getting closer to neutral and that there is “some evidence” that the world economy is slowing. His comments follow those of Fed Chairman Jerome Powell, who cited the prospect of cooling global demand in a speech Wednesday.
A tame inflation outlook may also support the case for the Fed to scale back its rate-hike trajectory, as Clarida said he doesn’t anticipate a big pickup in price pressures in 2019.
“That clears the way for an expected lower path of real rates,” BMO rates strategist Jon Hill wrote in an email Friday.
Bond Market Reaction
Only 3.6 basis points separate the 5- and 3-year durations.
Only 4.4 basis points separate the 3- and 2-year durations.
That's where yield curve inversion will likely begin.
Mike "Mish" Shedlock