How Long Before The Fed Tries To Manipulate Long-Term Rates Lower?

Authored by Mike Shedlock via MishTalk,

The Fed pledged to hold interest rates low for a very long time. What about the long end of the curve?

Yields Reveal a Mini-Revolt On the Long End

• 3-Month Yield: 0.04%

• 1-Year Yield: 0.06%

• 2-Year Yield: 0.11%

• 3-Year Yield: 0.20%

• 5-Year Yield: 0.50%

• 10-Year Yield: 1.20%

• 30-year Yield: 2.01%

US 30-year yield back to a 2-handle. Highest since Feb 19 (so a new post-pandemic high)

Among the developed markets, only the mighty 30-year Aussie has a higher yield. pic.twitter.com/VPYcOKaA7H

— Jim Bianco (@biancoresearch) February 12, 2021

Yield Curve Dramatically Steepens

Notes

1. In July of 2018 the spread between the spreads was only 12 basis points with the 2-30 spread at 38 basis points and the 2-10 spread at 26 basis points.

2. The 2-30 spread at 1.83 is higher than any time since February 10, 2017.

3. The 2-10 spread at 1.07 is higher than any time since April 7, 2017.

Fed Losing Control of Long End

1. On February 8, the Fed noted Monetary Policy Will Stay Accommodative For a Very Long Time. I commented “Like Forever”.

2. On February 10, in a speech on the labor market Powell said the True Unemployment Rate is Actually 10%

In Powell’s speech, he reiterated the message rates would stay low.

But spreads have widened dramatically which begs the question: 

How long before the Fed openly intervenes to push rates lower on the long end of the curve?