“Bernanke will have to sit on the fence, and I wouldn’t expect a clear message,” said Patrick Legland, head of research at Societe Generale in Paris, said in an interview on Bloomberg Television’s ‘On the Move’ with Manus Cranny. “We are on the road for 2.75% 10-year yields on Treasuries.”
The International Monetary Fund urged the Fed to carefully manage its exit plan from stimulus to avoid disrupting financial markets. The IMF on June 14 left its U.S. growth forecast for this year at 1.9% and cut its prediction for 2014 to 2.7%, from 3% growth predicted in April.
“Effective communication on the exit strategy and a careful calibration of its timing will be critical for reducing the risk of abrupt and sustained moves in long-term interest rates,” the Washington-based fund said.
The Fed Bank of New York’s general economic index climbed to 7.8 this month, the highest reading since March, from minus 1.4 in May. Readings of greater than zero signal expansion in New York, northern New Jersey and southern Connecticut. The median projection in a Bloomberg survey of 51 economists called for a reading of zero.
A report tomorrow is forecast to show the consumer price index increased 1.4% in May from a year earlier, according to economists in a Bloomberg News survey. The central bank’s target is 2%.
The Fed is buying $85 billion of government and mortgage securities a month to spur the economy, and has kept its target for overnight lending between banks at almost zero since December 2008. Through its purchases, it has increased its assets to $3.4 trillion.
The central bank will buy as much as $5.75 billion of Treasuries today due March 2018 to February 2019, according to the New York Fed’s website.
Treasuries lost 1% this year through June 14, according to the Bloomberg U.S. Treasury Bond Index. Japanese government bonds returned 0.4% and German bunds fell 0.7%, separate indexes show.