It isn’t hard these days to find investors trumpeting the demise of the decades-long bull run in Treasuries.
A word of warning for all those bond traders banking on a Federal Reserve rate hike as soon as next year: Since 2008, markets have underestimated how patient officials can be in lifting borrowing costs from zero.
Stripped down to basics, the new consensus in economics goes like this: It’s fine for governments to borrow and spend more money -- so long as they can get hold of it cheaply.
Bond traders have been saying for years that liquidity is there in the world’s biggest bond market, except when you really need it.
The obstacles to higher yields in the world’s biggest debt market are slowly melting away.
The U.S. Treasury held steady its planned issuance of longer-dated securities at a quarterly debt auction next week as the department awaits the result of the Biden administration’s push for a fresh coronavirus relief package.
Jerome Powell doesn’t want to talk about scaling back massive Federal Reserve asset purchases -- at least not yet -- but it’s only a question of time before the discussion resumes and that might not be a bad thing.
The era of swelling Treasury auctions may be over for now, but investors are still about to absorb a historical deluge of long-term debt next year, with potentially painful implications for returns.
The Treasury market’s bears may find a dose of vindication this week given that the Federal Reserve may disappoint some traders by not tweaking its bond-buying program, which could finally catapult 10-year yields above 1%, even if only briefly.
A familiar scenario may be about to play out in the world’s biggest debt market, with a major breakout in long-term Treasury yields at risk of faltering after a banner couple of days for bond bears.
The tide in the $20 trillion Treasury market appears to be turning in favor of the bulls for now, with expectations growing that the Federal Reserve will boost purchases of longer-maturity debt as soon as next month.
The message from the bond market after the latest brief leap in yields is clear: The Federal Reserve is standing by to prevent an alarming increase in rates, no matter how much debt the Treasury sells amid the pandemic.
They will be part of what the president calls his war with the “invisible enemy” of Covid-19. The fiscal 2020 deficit that needs to be funded will be four times as large as last year’s at $3.8 trillion, or almost 19% of GDP.