SYDNEY: U.S. Treasury yields were shoved higher in Asia on Friday as analysts rushed to predict an ever-more hawkish outlook for U.S. interest rates, punching the belly of the curve particularly hard.
Yields on five-year notes climbed to their highest since late 2018 at 3.048%, a jump of 24 basis points for the week and widening the gap over 30-year yields of 2.945%.
Fed funds futures extended their precipitous decline as the market priced in rates of 2.0-2.25% by July, and on to around 3.0% by the end of the year.
Traders said investors were spooked by the latest call from Nomura where analysts predicted the Federal Reserve (FOMC) would hike rates by 75 basis points in both June and July, on top of a 50-basis-point move in May. "FOMC participants appeared to open the door to such action this week," they said in a note. "Over the near term, the Fed remains squarely focused on bringing rates to a neutral setting around 2.25-2.50%."
On Thursday, Fed Chair Jerome Powell confirmed a half-point rate increase will be "on the table" when the Fed meets on May 3-4, while other officials flagged moves of 75 basis points as a possibility.
(Reporting by Wayne Cole)