With the US 10yr bond yield having collapsed by as much as 20bps over the past few sessions, Westpac's Financial Markets Strategy team provided their take on how much lower can US bond yields go and said that there is little to be gained from pushing against the current trend.

Key quotes:

“As we noted in our introductory paragraph, current Fed pricing for 2019 reflects 2 rate cuts and a greater than 50% chance of a third, and so the market’s Fed call is very similar to our own forecasts of a cut at each remaining meeting this year. That suggests that valuations across the curve are very tight. However, price action this year has paid those that were either long or square and tactically bought the dip. The circumstances behind that sentiment and momentum only increased, so we see little reason to be sceptical about further positive momentum in bond markets this week. Even so, it is timely to ask how low US 10yr yields can go?”
“The current yield is now only a handful of basis points off the all time low set in 2016. Yields have retraced all of the move higher post Trump’s election and are now significantly more expensive relative to terminal Fed Funds expectations than they were at that time. However, 10yr yields have sustained current relative valuations previously. So, with the signalling from the 2-10yr curve that has been highlighted in recent weeks, combined with the deterioration in global geopolitics, we think yields can sustain around 1.5% and could move lower if the Fed signalled that the current cycle might be extended beyond its current “mid-cycle” pre-emptive categorisation.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: bears pressuring, 1.0980 critical support

Risk aversion took over the FX board on Friday, weighing on high-yielding assets. The EUR/USD pair, finished the week just a handful of pips above the 1.1000 figure amid mounting tensions between the US and China.


GBP/USD: at risk of losing more ground in the short-term

The GBP/USD pair advanced up to 1.2581, it highest in over two months, but was unable to sustain gains, ending the week around 1.2470. Cable could keep losing ground on a break below 1.2460, the immediate support.


USD/JPY: at a bring of breaking lower

Fresh risk-off flows resulted in the USD/JPY pair trimming weekly gains on Friday, ending the week at 107.55. The pair barely holding above a critical Fibonacci support at 107.45. Japan’s National inflation steady at lows in August.


Gold climbs further beyond $1500 mark, lacks follow-through

Gold edged higher for the second consecutive session on Friday, albeit remained well within a familiar trading range held over the past two weeks or so.

Gold News

Top 3 price prediction Bitcoin, Ripple, Ethereum: Ethereum points to the Moon as Bitcoin takes a break

ETH/USD exceeds $220 and is bidding to lead the market. Bitcoin sets a bear trap and recaptures $10,000. XRP stalls between technical levels and fails to consolidate $0.30.

Read more