HALISTER1: Rising Money Market Rates Spur Advance in UST Yields: J. Baer

Rising Money Market Rates Spur Advance in UST Yields: J. Baer

(Bloomberg) -- Rising money market rates are adding to upward pressure on UST yields, Markus Allenspach, head of fixed income research at Julius Baer, writes in e-mailed comments.
  • The increase in money rates is unsettling the bond market for two reasons:
    • The decoupling of interbank rates from the Fed funds target rate could be seen as a sign the U.S. central bank is losing control of the short end of the market
    • Money market rates above 1% mean there’s less incentive to buy expensive corporate or government bonds
  • So far, the Fed has done nothing to counter the increase of interbank funding costs
  • NOTE: Libor will extend its climb amid prime fund outflows into Oct. 14 reform compliance deadline, TD says
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Markus Allenspach (Bank Julius Baer & Co AG)

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