by Wolf Richter, Wolf Street:
During prior incidents of an “inverted” yield curve, the Fed had no tools to get the market to push up long-term yields. Today it has one: the QE Unwind.
The price of three-month Treasury securities fell and the yield — which moves in the opposite direction — rose, ending the year at 1.39%, after having spiked to 1.47% on December 26, the highest since September 12, 2008. This is in the upper half of the Fed’s new target range for the federal funds rate (1.25% to 1.50%). Back in October 2015, the yield was still at 0%:
The Fed is tightening, and clearly, this end of the Treasury market believes it.
The one-year Treasury yield rose to 1.76% on Thursday, and stayed there on Friday, the highest since September 20, 2008. It had fallen as low as 0.1% in 2011 and 2014. Note the nearly uninterrupted spike since September 8, 2017. Mid-September was when the QE Unwind transitioned from vague idea to a scheduled series of events:
The two-year yield hit 1.92% on Tuesday, the highest since Sep 30, 2008, and ended the year at 1.89%. Note the nearly uninterrupted spike since September 8:
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