U.S. Fed likely to engage in yield curve control – Russell Investments survey

LONDON, June 17 (Reuters) – Many bond and currency managers expect the U.S. Federal Reserve to adopt a policy of yield curve control as early as the second quarter of 2020, according to a survey released by Russell Investments on Wednesday.

Bond market players are increasingly convinced that one of the Fed’s next moves will be to cap yields at a specific point on the curve, by buying 2- or 3-year maturities for example, to reinforce their guidance that interest rates are unlikely to rise soon.

According to a fixed income survey by Russell Investments, 70% of 68 managers surveyed said they expected the Fed to engage in yield curve control, starting as soon as the second quarter of 2020.

50% of those surveyed expect yield curve control for at least three years, while the consensus view among bond and currency managers was that the Fed was unlikely to cut rates into negative territory.

In Europe, 70% of respondents said they expected peripheral euro zone government bond yield spreads over German Bunds to tighten over the next 12 months. (Reporting by Dhara Ranasinghe; Editing by Tom Arnold;)

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