Mohamed El-Erian said Federal Reserve officials are promoting the idea that they’re preparing to raise interest rates, as a global bond market rally comes to a halt. Officials “continue to talk up,” an increase, El-Erian, the chief economic adviser at Allianz SE and a Bloomberg View columnist, wrote on Twitter Sunday.
John Williams, president of the Fed Bank of San Francisco, said Sunday on Fox News the U.S. economy should be solid enough to merit raising interest rates in 2016. Eric Rosengren, head of the Boston Fed, said the U.S. is near the threshold for a move, the Financial Times reported Sunday. Rosengren votes on the policy committee this year, while Williams does not.
A rally that sent global yields to a record has come to an end as investors prepare for the Fed to act as soon as its next meeting June 14-15. The average yield on the bonds in Bank of America Corp.’s Global Broad Market Index has climbed to 1.35 percent from the all-time low of 1.27 percent set May 11.
“The Fed is ready to increase the policy rate,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has $59.4 billion in assets. “I think they will move in June or July. Treasury yields should go up.”
Benchmark U.S. Treasuries were little changed, with the 10-year yield at 1.84 percent as of 10:22 a.m. Monday in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in May 2026 was 98 2/32. The yield will be 2 percent or more by year-end, Suzuki said.