Tags: Suisse | Rate | Note | Yield

Credit Suisse Rate Strategist: 2-Year Note Yield Headed Higher

Wednesday, 09 Jul 2014 03:31 PM

Treasury two-year note yields will jump to the highest level in more than three years if the Federal Reserve raises interest rates in the second half of 2015, Credit Suisse Group AG’s Ira Jersey said.

The yields will “be north of 75 basis points,” or 0.75 percent, Jersey, an interest-rate strategist at the firm, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene. Two-year yields last touched that level in April 2011.

“Two-year notes are going to have to go up in yield — they don’t have a choice,” said Jersey, whose bank is one of the 22 primary dealers that trade with the Fed. “Just the mathematics alone tells you.”

Two-year yields traded at 0.49 percent Wednesday afternoon in New York after touching 0.32 percent on May 20, a two-month low. Five-year notes yielded 1.67 percent.

Treasurys erased losses after minutes of the Fed’s June meeting showed some policy makers were concerned investors may be too complacent and the central bank should be on the lookout for excessive risk-taking.

The U.S. central bank has held the benchmark interest-rate target in a range of zero to 0.25 percent range since December 2008 to support the economy. The odds of a rate increase by September 2015 are 80 percent, fed-funds futures trading shows. Shorter-term Treasuries are most sensitive to changes in interest rates.

While the Fed is planning to raise rates in a way that does not surprise the market, “there’s going to be pain,” Jersey said before the Fed minutes were released.

“You’re going to keep on getting the front end of the curve, and five-year notes, for example, are going to wind up doing very, very badly,” Jersey said.

There are already signs inflation is rising amid an improving economy, he said.

Core consumer prices, a measure that excludes food and energy, jumped 2 percent in May from a year earlier, versus a 1.8 percent rise in April, Labor Department data showed June 17.

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Treasury two-year note yields will jump to the highest level in more than three years if the Federal Reserve raises interest rates in the second half of 2015, Credit Suisse Group AG's Ira Jersey told Bloomberg.
Suisse, Rate, Note, Yield
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2014-31-09
Wednesday, 09 Jul 2014 03:31 PM
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