This could be a significantly volatile week as the Federal Reserve releases is policy decision later this week. With economicand jobs data still looking decent, the market has put a bit of vigour back in to shorter term yields. The 2 year is now tradingback to its highest level since mid‐October and ticking back over the 0.30% level. The longer end of the curve is a bit morestable however, having drifted higher since late October. The pickup in short term yields has matched that in Fed Funds futuresimplied yields, as the December 2015 contract is now fully priced for a 25bp rate hike to just over 0.65%. This is consistentwith Scotia’s current view for a policy move (in Fed Funds anyway) in the third quarter of 2015.
Read the full report: FX Daily
Scotiabank