Treasuries most sensitive to the Federal Reserve suffer the largest loss since 2019 – News Couple
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Treasuries most sensitive to the Federal Reserve suffer the largest loss since 2019


(Bloomberg) – US debt most responsive to changes in Federal Reserve policy is driving this week’s shock inflation fallout.

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Five-year Treasury yields jumped 20 basis points this week to 1.26% as of 6:06 a.m. in New York, and are set to see their biggest increase in two years, as traders consider the possibility of an earlier Fed rate hike. What the market is currently expecting. . Debt yields of similar maturity by Italy led the euro zone moves, rising as much as five basis points before pulling back.

Global bonds have had a wild month, with yields moving as investors reassess their expectations for the path of interest rate hikes as inflation accelerates. The treasury market experienced unusually large price swings as liquidity dried up, to the worst measure since the height of investor pandemic fears in March 2020.

said Kenta Inoue, chief market economist at Mitsubishi UFJ Morgan Stanley Securities Ltd. In Tokyo: “Investors and federal policy makers are still not sure whether high inflation will be temporary or not.” As such, “we are likely to see greater volatility in the market.”

The US Treasury market is the most treacherous since the beginning of the epidemic

Benchmark 10-year bond yields rose three basis points to 1.58%, up from just 1.41% on November 9. Earlier, the additional yield on 30-year notes on five-year notes shrank 2 basis points to 64 basis points, the lowest rate since then. March 2020.

Yield Curve Collapse Showing Fear A high rate of fear will stifle growth

Traders await Friday’s University of Michigan survey results which are expected to show consumers’ expectations for inflation next year have risen to a 13-year high. Overnight tick swaps suggest that the Fed may raise interest rates as soon as possible in July next year.

“Inflation is expected to remain elevated,” Naokazu Koshimizu, chief price strategist at Nomura Securities in Tokyo, wrote in a note. “As such, expectations of an earlier rate hike by the Fed will continue to put downward pressure” on the Treasury curve.

(Price updates throughout.)

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