Bond traders are optimistic about gliding through the remainder of a thundering year unless an unexpected surge in inflation throws them off the course once again. Treasuries on Friday continued their recent upswing following the monthly jobs report which suggested that the labour market is cooling sufficiently for the Federal Reserve to consider cutting interest rates at their upcoming meeting on the 18th of December.
This employment data is viewed as one of the last significant indicators for the market until the consumer and producer price reports are released this week, both of which are expected to show minimal inflationary pressures.
According to Gang Hu, managing partner at Winshore Capital Partners, “Unless the CPI surprises us with a significant increase, the Fed is likely to proceed with a rate cut this month, as they believe their current policy remains restrictive. I believe Treasury yields have reached their peak.”
This sentiment is offering investors a breather from the bond market selloff that was at its peak in November as triggered by the presidential win, of Donald Trump. This has raised concerns that his proposed tariff and tax cuts could reignite inflation.
However, since then yields have gradually declined amid speculations that the Fed will ease its policy at this month’s meeting which was the last one before Trump assumes office as it aims to guide the economy towards a soft landing. The benchmark 10-year Treasury yield has fallen to around 4.15%, down from the most election high of 4.15% on the 15th of November. The decline contributed to a 2.4% return for Treasuries as noted in a Bloomberg report. Yields remained relatively stable on Monday, ruing early trading in Asia. However, the period of tranquillity might be short-lived because of the considerable amount of uncertainty surrounding future policies.
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