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TREASURIES-Long-term yields increase in the run-up to Jackson Hole
Treasuries were sold in the Asian session on Monday, moved by the long end, as investors were concerned that the Federal Reserve’s Jackson Hole meeting could lay the groundwork for rates to remain higher for longer.
Thirty-year yields hit a new dozen-year high of 4.443%, an increase of more than 5 basis points (bps) on the day, an exceptionally big rise late in the Asia session.
Benchmark 10-year yields jumped 4.7 basis points to 4.292%, closing the gap with two-year yields to -66.4 basis points.
On the same day that China reduced rates to help its faltering economy, the action expanded Treasuries’ premium over Chinese rates, which reached its highest since 2007.
The subject of this year’s central bankers’ meeting in Jackson Hole, Wyoming, is “structural shifts in the global economy,” which analysts say has some investors concerned that officials will lay out dangers to interest rates’ upside.
On Friday, Fed Chair Jerome Powell is scheduled to speak. According to Vishnu Varathan, head of economics at Mizuho Bank in Singapore, he or other speakers might emphasize on structural factors to inflation or hint at how the natural level for interest rates might be higher in a post-COVID environment.
“There might be some reconsideration about the peak (in rates),” he added, or if there is talk of slower-moving developments in economies, longer-term rates will need to be adjusted. “Investors may be putting on some hedges.”
Twenty-year rates jumped more than 5 basis points to their highest level since October, at 4.267%. Two-year rates increased 2.6 basis points to 4.962%.