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NEW YORK (Reuters) – JP Morgan's bond badysts downgraded their outlook for US Treasury yields for 2019 as rising risks to the economy stem from trade tensions that could lead the Federal Reserve to cut back Interest rate twice during the second half.
They revised down their end-of-year targets on Friday night on yields on two-year Treasury bills, which went from 2.25% to 2.25% to 1.40% previously, and 2.45% to 1.75% on 10-year returns.
By the way, JP Morgan economist Michael Feroli said Friday expecting the US central bank to lower its key rates twice later this year: a quarter-point cut in September, followed by a further decline of a quarter point in December.
Earlier this week, investors were already withdrawing money on equities and other risky badets, fearing a protracted trade war between China and the United States.
On Thursday, the surprise announcement by US President Donald Trump to impose tariffs on Mexico on June 10 rocked the financial markets, sending investors rushing into the fold of the yen, Swiss governments and American.
US two-year and 10-year yields fell to 1.916% and 2.126% on Friday, their lowest levels since September 2017.
Trump's move is to compel the Mexican government to prevent immigrants from going illegally to the United States on its southern border. Analysts warned that the 5% tariffs on Mexican tariffs, if they took effect, would increase costs for US businesses and consumers, which would dampen the economy.
"In this context, we are also revising our lower interest rate expectations and no longer looking for higher yields at the end of the year. Instead, we expect yields to fall again in the coming months, "JP Morgan badysts wrote in a study released last Friday.
Richard Leong report; Edited by Alistair Bell
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