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Sharp statements from Fed officials and extremely high inflation have increased expectations of interest rate hikes. U.S. bond yields have risen and prices have fallen, spooking investors who were previously heavily bullish.
Recently, the US bond market has seen a large number of bullish movements, but in the last two daysfederal Reserve (Fed) officials have issued sharp comments, and the latest data showsinflation Remaining high, increasing market expectations of interest rate hikes, driving up US debtproduce The rally resumed, but prices fell sharply in the opposite direction. Investors’ long bets on US debt suffered a huge blow and failed.
This wave of selling caused the US 2-year Treasury yield, which is sensitive to monetary policy, to rise by about 18.9 basis points to 4.736% on the 10th, the largest one-day increase in 19 months. The 10-year yield also returned above 5% once, giving a boost to investors who had plunged into US debt or eased their bearish sentiments due to recent doubts about the prospects of artificial intelligence (AI) trading.
Bank of America (BofA) strategists pointed out in a report on the 8th that in the past week, asset managers continued to build long positions in government bond futures of various maturities while covering short positions in long-term government bonds.
However, US consumer prices rose more than expected in October. Fed Governor Waller expressed support for raising interest rates on the 10th, and even said that if inflation continues to accelerate, he will not rule out raising interest rates by 2 cents at a time. Dallas Fed President Lori Logan also made sharp comments, boosting market expectations that the Fed will pursue more aggressive tightening policies.
Ed Al-Husseini, an investment manager at Tianli Investment, said that as traders expect the Fed to tighten monetary policy ahead of its meeting in March next year, 2-year US Treasury yields “still have room to return to the level seen at the end of September,” when the yield reached a high of just under 5%.
On the other hand, JPMorgan Chase’s U.S. data released on the 10th. The Treasury survey showed that in the week ending on the 9th, investors’ confidence in the direction of the market weakened, and the proportion of neutral positions increased by 9 percentage points to the highest in nearly 12 weeks. The ratio of long and short positions fell by 5 and 4 percentage points, respectively, to the lowest level in the same period.
Summary FAQ
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As the market basically established a large number of long positions in US Treasuries, Fed officials repeatedly made hawkish comments, and inflation data was higher than expected, which led to increased expectations of interest rate hikes. Yields rose sharply and bond prices fell.
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The 2-year government bond yield, which is the most policy-sensitive, rose nearly 18.9 basis points in a single day to 4.736%, the largest increase in 19 months; The 10-year yield also returned above 5% once.
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Fed Governor Waller supports raising interest rates and does not rule out raising interest rates by 2% at a time; Dallas Fed President Logan also issued an aggressive signal. Another survey from JPMorgan showed that the ratio of bulls to bears fell, and the neutral position reached a near 12-week high.
