FOMC Minutes to push yields slowly higher again - SocGen

According to Kit Juckes, Research Analyst at Societe Generale, in these quiet markets, bond bears are likely to find just about enough encouragement from the FOMC Minutes (on track for more easing) to push yields slowly higher again.

Key Quotes

“The focus of those reading the Minutes will be on the Fed’s balance sheet plans, but beyond that, what matter sis where rates are headed over the medium term, rather than where they are going in the next few months. In that vein, while markets are convinced there will be another hike in June, they place the odds of a rate above 1.5% at the end of 2018 at a less convinced 58%, and the odds of a rate above 2% at under 10%.”

“Pricing-in 4 rate hikes over the next 18 months is enough to put a cushion under bond yields, but it’s not exactly aggressive. And that’s a recipe for USD/JPY to go on edging higher as long as the BOJ’s on perma-hold. 10year TIIPs yields are back at 43bp, en route perhaps to another foray above 50bp and taking USD/JPY with them.”