Analyst Pin-board US first rate hike in March?
- According to the hawkish language of the Fed minutes released last week, market participants seem to believe that the first rate hike will be in March, not May as previously expected.
- The minutes have also caused the markets to start to focus on the timing of the commencement of Fed balance sheet contraction, otherwise known as quanto tightening.
- This caused a sell-off in bond markets around the world.
Last week the and the spike in Treasury yields sparked a selloff in bonds around the world. Germany’s 10-year borrowing costs (Figure 1), while yields in Japan and Australia also jumped. US 10-year Treasury yield was at 1.71% on Friday (Figure 2) with overnight swaps now implying an 80% chance of a 25-basis point rate hike in March.
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