US Regulators (the Federal Reserve) Hopes For Improved Bond Market Data

Treasuries are struggling following an improved US manufacturing gauge (now its highest since 2015). Combined, then, these factors may best support the Federal Reserve’s insistence to raise interest rates this year.

Indeed, benchmark 10-year note yields jumped after the Market purchasing manager’s index saw a climb, this month, to its highest since last October.

“The PMI was a little stronger than expected,” explains Thomas Roth, who is a senior Treasury trader in New York at MUFG Securities Americas Inc. He continues, “It’s a good sign. We are looking for that revival in manufacturing. People are getting more convinced that the Fed is going to go in December.”

Futures show that traders anticipate a roughly 70 percent chance of a rate hike by the end of the year. This is up from 66 percent, from only a week ago, and even in the face of a 20 percent chance of an increase as early as next week, at the Fed’s next policy meeting. Accordingly, the St. Louis Fed President James Bullard said, Monday, it is more likely that U.S. interest rates will remain very low for at least another few years as a result of low productivity and lower investor demand for safe assets.

As such, these benchmark U.S. 10-year yields bumped up only three basis points (approximately 0.03 percentage point) to 1.77 percent in late morning trading in New York. This is the highest intraday level since Oct. 18.

Federal Reserve Bank of New York president William Dudley confides that regulators—like the Fed—need “improved access to transaction-level data” if the Treasury market is going to hold steady as a global financial assets benchmark and a source for short-term collateral.

Accordingly, counselor to the US Treasury secretary Antonio Weiss comments, “Treasury remains committed to close and careful review of the data before making any determinations, But we believe the debate should shift from whether to seek increased transparency to how, when, and on what basis.”

Weiss goes on to outline three new strategies for public disclosure on trades. These are: time delays, size limits, and phase-in. Weiss goes on to say, “Transparency is not all or nothing; and one size may not fit all segments of the Treasury market.”

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