The U.S treasury bonds climbed on Thursday after dovish FOMC meeting minutes. The benchmark 10-year bonds yield, which is inversely proportional to bond price fell 0.98 pct to 1.736 pct and 3-year bonds yield dipped 2.22 pct to 0.84 pct 13:00 GMT.
The Fed in its March FOMC meeting minutes indicated that participants agreed that their ongoing assessments of the data and the implications for the outlook, rather than calendar dates, would determine the timing and pace of future adjustments to the stance of monetary policy. Although a range of views were expressed about the incoming information would be sufficient to make an adjustment in April, a number of participants judged that headwinds restraining growth (an holding down the neutral rate of interest) were likely to only subside slowly.
Accordingly, factoring risks to the economic outlook, several participants expressed the view that raising the target range for Fed Funds as soon as April would signal a sense of urgency that they did not think was appropriate. This very much supports the view that rates are likely to move higher over the course of 2016 (most likely beginning in June), though appears to increase the likelihood that the April meeting would see the current “wait and see” approach to monetary policy continue.
On Wednesday, the 2-Year yield found some upward pressure, though still continued to hold below the 0.75 pct-mark, alongside a larger move in the 10-Year yield, breaking back above 1.75 pct.
Markets now look ahead to less significant data on Thursday, highlighted by jobless claims, followed later by consumer credit.
Lastly, we continue to expect the Fed will deliver about 50bps of additional tightening over the remainder of 2016, with an initial move coming at the June meeting and then allowing some cushion to move further at September or December meeting.
