Bond Yield, Rate Hike Estimate Readjusted By Wells Fargo
Wells Fargo is finally adopting few changes as bond yields show impact on fears of global growth. In February 2019, the firm has made some cut in target of bond yields as well as forecast of interest rate increase of the Federal Reserve at the year end. Global head of the interest rate strategy of Wells Fargo mentioned that this decision has no connection with the economic slowdown in foreign lands. Michael Schumacher told that the Fed hardly cares regarding European growth. After following up with the comments of Fed and the even more peaceful comments from Chairman Jerome Powell concerning the economy of last few months, Schumacher felt there was an immediate need to readjust the expectations of the firm.
He said that it becomes difficult for firms to adjust to consecutive changes over frequent intervals. When they were at two, they had argued a lot. Since two was way more for them to continue, they would run on the one rate increase at least for now in 2019. Schumacher thinks that this step would not cause dangerous inversion of the treasury yield. In case treasury yield of 2-years or 10-years invert, that calls for unpredictable troubles in the economy.
With so many hikes already, one more would hardly have a massive impact. Central banks have huge portfolios and they have played with the market rates to a great extent. Therefore, one more hike would not cause any recession. Schumacher also thinks that the single hike of 2019 would appear at the start of third quarter. Similar prediction is being made by Wall Street as well as the last Fed Survey made by CNBC. Thus, with the prediction, Schumacher and his team of experts thought it best to keep the treasury yields target at the yearend low. On February 8, 2019, the firm has been at the lowest since the beginning of February.
