Fed rate hikes remain a distant prospect - BNZ

Jason Wong, Currency Strategist at BNZ, notes that despite softer-than-expected readings for US ISM and construction spending data, the 10-year Treasury rate is up 4bps to 1.50%.

Key Quotes

“In a speech yesterday afternoon, the Fed’s Dudley, one of the few speakers we take particular note of, said that the market was right to price in a flatter path for short term interest rates but investors were still underestimating how many times the Fed will likely raise rates this year and next year.

These comments were followed up by Dallas Fed President Robert Kaplan, a hawk, saying that an increase in September is “very much on the table.” The market, rightly, didn’t take too much notice of these comments with Fed funds pricing through 2016 down ever so slightly and up slightly for 2017.

More weak data like that recently released, including the poor GDP data on Friday, can only strengthen the market’s resolve that Fed rate hikes remain a distant prospect.”