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Is it finally time to buy US bonds? Bond investors bet on ending interest rate hikes

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moomooニュース米国株 wrote a column · Sep 4, 2023 05:31
This article uses automatic translation for some of its parts
Since the US Federal Reserve (Fed) began raising interest rates 18 months ago, cracks began to be seen in the labor market for the first time, and bond investors saw that the tightening cycle had finally come to an end, and embarked on that bet.
Employment indicators decelerated one after another in the previous week (US ADP Private Employment、US PCE Price Index), Friday'sAugust employment statisticsIt reached its pinnacle with Market sentiment is leaning towards holding 2-year government bonds that are sensitive to policy, and Jeff Rosenberg of BlackRockThe 2-year government bond was described as a “screaming buy (screaming buy)”。
It looks like the Fed is ending its most aggressive interest rate hike for the first time in decades. Since short-term bonds become more advantageous than long-term bonds at this time, as the focus shifts to the possibility and timing of the Fed shifting to mitigation, investorsYield curve'sSteepPay attention toIt started. Also, since companies usually rush to issue bonds after the Labor Day (Labor Day) holiday in the United States, pressure is applied to long-term bonds, so there is a possibility that this strategy is also benefiting from seasonal trends.
“The results of employment statistics gave the bond market a sense of security with the view that “the Fed will remain unchanged for the time being, and this interest rate hike cycle will come to an end.” If the current interest rate hike cycle comes to an end, the focus of the market will be identifying the first interest rate cut leading to a stepping yield curve,” said Michael Kuzill, portfolio manager at Pacific Investment Management.
2-year bond yields fell from high prices
2-year bond yields fell from high prices
While the inflation rate has been on a downward trend in recent months, a strong employment market seems to be an obstacle to the Fed's suspension of interest rate hikes. But now,There are signs that the labor market is cooling. Automatic Data Processing (ADP), a payroll service for enterprises, announced it on 08/30National Employment Report for AugustAccording to the report, the number of people employed in the private sector increased by 177,000, which was lower than expected (19.5,000 increase). Also, the US Department of Labor announced it on 09/01August unemployment rateIt was also 3.8%, which was higher than expected.
Changes in the number of people employed in the US private sector
Changes in the number of people employed in the US private sector
Changes in the US unemployment rate
Changes in the US unemployment rate
A series of data releases last week showed a softening of the labor market. $U.S. 10-Year Treasury Notes Yield(US10Y.BD)$After it recorded a high level since 2007, bond investors cheered for these data. The yield on 10-year US bonds, which is a benchmark for global borrowing, fell below 4.2% at closing prices last week.
“Employment statistics show signs of the end of a strong job market, and the countdown for when the Fed will leave it unchanged has begun. Also, $U.S. 2-Year Treasury Notes Yield(US2Y.BD)$There is a possibility that it will decline towards 4.5%,” said George Goncalf, who is in charge of US macrostrategy at MUFG.
In response to the sharp drop in long-term bonds on Friday, Svadra Rajappa, who is in charge of US interest rate strategy at Societe Generale, explained that “traders are wary of an increase in the issuance of corporate bonds next week.”
According to the CME Group's “FedWatch” tool, the possibility of another interest rate hike factored in by traders until the current November is just under 40%, and the possibility of interest rate cuts will be just under 80% by next June.
Is it finally time to buy US bonds? Bond investors bet on ending interest rate hikes
Is it finally time to buy US bonds? Bond investors bet on ending interest rate hikes
moomoo news~ Zeber
Sources: Bloomberg, Economictimes, FedWatch, PIMCO
This article uses automatic translation for some of its parts
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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