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Treasury Yields Slip Amid Doubts About Neutral Rate

Treasury yields turn lower, with the 10-year at 3.021%, down from 3.035% Monday, and the two-year falling to 3.318% from 3.335%. Markets still leaning toward a 75-basis point rate increase next month, while discussing how far the Fed wants to go. “This remains the bigger theme,” AmeriVet’s Gregory Faranello says in a note to clients. “It’s not really 50 versus 75-basis points in September,” but what the Fed’s estimate for neutral rate is, he says. “With the FOMC Minutes very clear the Fed’s intent to move into sufficient restrictive territory, a 2.25[%] versus 3% neutral estimate is meaningful.” Faranello expects Powell to elaborate on the theme at Jackson Hole.