All articles tagged with #bond traders
Bond traders are preparing for the possibility of 10-year US Treasury yields exceeding 5% amid increasing chances of the Federal Reserve not cutting rates this year, with Schroders Plc shorting US bonds and Pacific Investment Management Co. expecting a more gradual pace of policy easing, and a "non-negligible" chance of no rate cuts at all.
Bond traders are hoping for signs that the Federal Reserve is gaining control over inflation, as the strong US economy has pushed Treasury yields to their highest levels since late November. Investors are scaling back bets on interest-rate cuts, anticipating cautious policymaking, and the market took another hit after unexpectedly strong US payroll data in March.
European equity futures declined ahead of crucial US inflation data, with the Euro Stoxx 50 contract falling 0.3% and Asian markets climbing. Federal Reserve Bank of Richmond President Thomas Barkin highlighted the risk of inflation falling back toward the central bank’s target due to US businesses boosting profit margins by raising prices. Bond traders are now more in line with the Fed’s rate trajectory, but Citigroup Inc. strategists warn of overlooking the risk of rate increases following the easing cycle. In Asia, the yen fell to trade around 149 per dollar, and MSCI removed 69 companies from its China and Hong Kong global standard indexes.
Bond traders are adjusting their rate-cut bets in response to the Federal Reserve's aggressive interest-rate hikes, after consistently misjudging the extent of the Fed's actions in 2022, resulting in significant losses as Treasuries tumbled.
Bond traders have reduced the likelihood of a Federal Reserve interest-rate cut in March to about one-in-three, following a report on US job openings indicating strength in the labor market. The odds of a rate cut in May have also decreased, with confidence in rate cuts reaching the lowest point since mid-December. The Fed's rate-setting committee is expected to make no change at its upcoming meeting, but statements from Chair Jerome Powell may impact the outlook for interest rates.
Bond traders are anticipating a return to the traditional trading pattern of US Treasury yields, with the interest rate on 10-year Treasuries expected to surpass those on US two-year notes, resulting in a steepening of the yield curve. This shift would align with historical norms and provide greater rewards for the risk of lending money for longer periods.
Bond traders remain confident in a 2024 bond rally despite a recent pullback, seizing on elevated yields before anticipated interest rate cuts by the Federal Reserve. The market faces a test with upcoming inflation data and a 10-year Treasury auction, but buyers stepped in as 10-year Treasury yields approached 4.1%, the highest since mid-December, following strong job growth data.
Bond traders in the US Treasury market, who have fueled a significant rally in recent months, are awaiting Friday's jobs report to determine if their optimism is justified. Softening inflation and employment data have led investors to believe that the Federal Reserve will cut interest rates by at least 1.25 percentage points over the next year. However, the Fed has cautioned against premature talk of rate cuts. The report is expected to show moderate employment and wage growth in November, but any surprises challenging the bullish narrative could lead to a market reversal.
Bond traders, known as "bond vigilantes," are expressing concern over the US government's growing budget deficit and national debt. These traders believe that the government is issuing too much public debt through bonds, which investors may not be willing to absorb in an environment of elevated inflation and high interest rates. The deficit currently stands at roughly $67 billion for the current fiscal year, and the Congressional Budget Office estimates it to be $1.5 trillion for the full 2023 budget year. Bond vigilantes protest by selling bonds, causing yields to rise. The traders argue that the government's fiscal situation is unsustainable, given the record levels of debt-to-GDP ratio and the expectation of further increases.
US Treasury 10-year yields are climbing to their highest level since 9 October as market fears surrounding the Israel-Hamas conflict abate. Yields are expected to march towards 4.80% again, potentially impacting broader markets such as stocks and major currencies. Bond traders are sticking to familiar patterns, while the rising yields may keep sentiment on edge and support the dollar in the bigger picture.
JPMorgan Asset's Lebovitz warns of a greater risk of a "financial accident" as bond yields continue to surge at an alarming pace, causing nervousness among bond traders despite Congress's efforts to avert a government shutdown.
Bond traders are increasing their bets that the Federal Reserve will continue with interest-rate hikes, as the monthly consumer-price index report is expected to show a significant jump in inflation. The Treasury market has been volatile as strong economic growth and rising energy prices suggest that monetary policy may remain tight for longer than anticipated. While there is optimism that the Fed may be done with rate hikes, futures traders see a 50% chance of a rate increase in November. The pace of inflation remains above the Fed's target, and the upcoming CPI data will provide insight into the central bank's future actions.
Bank of America's Q1 profit beat analysts' estimates due to higher interest payments from customers and strong sales and trading revenues. The bank's bond traders had their best quarter in a decade. Bank of America, JPMorgan Chase, and Citigroup all benefited from higher interest payments in the first quarter while setting aside billions of dollars to prepare for a worsening economy. Despite concerns about a looming recession, consumer debit and credit spending remained robust due to strong U.S. employment and wage growth.
Bond traders continue to doubt the Federal Reserve's commitment to its inflation fight into 2024, despite the odds of a quarter-point increase in the federal-funds target becoming a near lock at the Fed's policy meeting on May 2-3. Markets keep pricing in rate reductions in 2023's second half, contrary to the best guesses of Fed Chairman Jerome Powell and his colleagues that the key policy rate will end the year at 5.1%, which implies no cuts after the May hike.