US Treasury bonds weakened sharply on Tuesday, sending yields firmly higher after the minutes of the Federal Reserve’s last policy meeting implied interest rates still had some way to rise.
It was the first time that the minutes have been published before the next meeting has taken place. The Fed said that the real Fed funds rate target - currently at 2.25 per cent - was still below the level needed to keep inflation stable.
“This statement fairly clearly lays out the prospect of further tightening ahead, with no sense that a funds rate this side of 3 per cent would reduce accommodation to the point where intermediate risks on costs and prices were not to the upside,” said Alan Ruskin, director of research at 4Cast consultancy.
Not a good sign.