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Prominent investor Bill Gross from Janus Henderson Group Plc warned the United States is looking at a recession in the case that the Federal Reserve lifts the benchmark interest rate more than one or two times in the next year. The central bank has been raising the target range in steps of a quarter of a percentage point and stepping up pace since December 2015. The gauge is currently at 1.75% to 2%.
The portfolio manager, a former co-head of Pacific Investment Management Co. (PIMCO), noted the consensus among Fed officials suggests three to four increases in the next twelve months and that forward Eurodollar markets point to two moves, according to a post on the firm's Twitter account on Tuesday.
The FedWatch tool, CME's futures tracker, showed bets of 58.4% at 8:13 pm CET for at least two more hikes through the last policymakers' meeting this year, scheduled for December.
Yields on debt issued by the United States Department of the Treasury grew on Tuesday, which means bond prices dropped, while stock markets in New York were showing a mixed bag. Precious metals declined and the dollar was mostly up. Traders showed the weakest demand in today's auction of three-year notes since April 2009, as the bid-to-cover ratio landed at 2.51. The figure compares to 2.83 from a sale one month before.
The high yield jumped to 2.685%, the strongest point since May 2007, from 2.664%. It compares to the when-issued level of 2.679%. Indirect bidders – a category including foreign central banks and international monetary authorities, purchased 39.6% of the accepted competitive tenders, the least since November 2014. Compared to 51.4% from the last round, it points to a fall in foreign bids.
July 10th, 7:50 PM (Source: TeleTrader.com)
