A new wave of selling pressure hit the U.S. Treasury market last week
A new wave of selling pressure hit the U.S. Treasury market last week, making it difficult for investors and analysts to predict how high Treasury yields will rise.
Barclays Group said two weeks ago that the bond market selling pressure had been excessive, but gave up this prediction last Monday; Bank of America said on Wednesday that it was looking for opportunities to sell government bonds , but immediately changed its statement on Thursday; On Friday, Federal Reserve Chairman Jerome Powell endorsed rapid tightening of monetary policy, and the market's immediate reaction was to predict that the Fed would raise interest rates by 2 percentage points in each of the next four meetings.
St. Louis District Federal Reserve President Bollard (Eagle King, with voting rights this year) said on the 21st that the bond market "does not seem to be a very safe place"; not many investors hold the opposite view, and some even think that He underestimated the danger. Analysts also pointed out that the Fed is now serious and interest rates will no longer just take off slowly.
In the European dollar interest rate futures market, investors have already expected that the Fed will raise interest rates by 3% at multiple meetings this year and conduct hedging operations. In the U.S. Treasury bond futures market, block trading has increased, and some investment management companies that have long been long in U.S. bonds also reminded clients to operate with caution.
Bloomberg The U.S. Treasury Bond Index has fallen 8% this year, the largest decline since the index was compiled in 1973. The selling pressure stems from investors' continued increase in expectations for interest rate hikes.
Ball said last week that he believed a "front-loaded" approach to raising interest rates might be appropriate, adding that the current labor market was "unsustainably hot," also pushing bond yields higher. In the past week, the 2-year U.S. Treasury yield, which is most sensitive to policy rates, surged by about 23 basis points to 2.69%; the 10-year U.S. bond yield rose by 7 basis points to 2.90%, once approaching 3%.
Obviously, Ball's remarks and the market's positive response to the expansion of interest rate hikes have not prevented inflation expectations from rising; the average inflation rate in the next 10 years is expected to exceed 3%. Analysts pointed out that this shows that the market believes that the Fed is no longer able to control inflation.
