Treasury volatility tumbled signaling that the Federal Reserve will raise interest rates at December

Treasury volatility tumbled to the lowest level this year, signaling there’s a growing consensus that the Federal Reserve will raise interest rates at its December meeting. Signs of stability in financial markets contrast with a jump in the index amid the turmoil stemming from China’s shock currency devaluation in August.

“There was uncertainty” over what the Fed would do earlier this year, said for Bloomberg Kim Youngsung, head of overseas investment in Seoul at the Government Employees Pension Service, which has $12.8 billion in assets. “Nowadays, everybody’s sure the Fed’s going to increase the interest rate in December. That’s why we haven’t had high fluctuations.” Yields are too low to buy, Kim said, adding he’s waiting for 10-year yields to increase to 2.50 percent. The median estimate of economists surveyed by Bloomberg is for them to rise to 2.31 percent by year-end.

Today US10Y: U.S. isquoted at 2.2588%, while US 10 Year T-Note Futures traded at the level of $ 126.71 (+ 0.09%) at 52 wk Range = $ 124.91 / 131.17 for Physical Settlement Type and minimum Day's Range between $ 126.56 and $ 126.71.

Futures contracts show a 66 percent chance the Fed will act when it meets Dec. 15-16, up from 50 percent odds at the end of October. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.

G.Hristov / Head of Fundamental Analyzes

(data source Bloomberg)