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Ten-year Treasury yield erased pre-Fed minutes gains

FXStreet (Mumbai) - The Ten-year treasury yield in the US erased gains after the Federal Reserve minutes expressed concerns regarding the falling inflation expectations in the US.

The Ten-year yield traded at 2.335% at the time of writing; down from the pre-minutes high of 2.356%. The yield declined since the minutes revealed policy makers are worried about the falling inflation expectations, which is likely to push the rate hike bets further out in 2015. Overall, the minutes sounded upbeat on the economy, but policymakers are in no rush to normalize the policy amid subdued inflation.

Moreover, the action in the interest rate futures tells that the expected date of the first interest rate hike has been pushed out from the Q3 2015 to late 2015. The falling inflation expectations are also evident from the spread between the nominal 10-year Treasury less its inflation-indexed counterpart, which dipped to a three-year low yesterday. Inflation estimate is now down to 1.8% from 2.3% in July.

Overall the treasury market appears to be pricing-in a strong dis inflationary trend in the days ahead. However, the next major trigger would come from the tomorrow’s CPI release, which may show a fall in the price pressures in October.

Ten-year yield Technical Levels

The yield has an immediate resistance at 2.363%, above which it can extend gains to 2.4%. Meanwhile, support is seen at 2.321% and 2.277%.

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