Investors are starting to bet that the worst ever rout in the US bond market may be coming to an end.
US 10-year yields slid the most since March in early Asian trade after dovish comments from Federal Reserve officials fuelled speculation the US tightening cycle is about done, while jitters over the Israel-Hamas war added haven demand. The move was more pronounced than normal as trading of cash Treasuries had been shut worldwide Monday for a US holiday.
Fed Vice Chair Philip Jefferson said he’s watching the increase in Treasury yields as a potential further restraint on the economy even though the rate of inflation remains too high. Fellow policymaker Lorie Logan said the recent increase in long-term yields may indicate less need for the central bank to raise rates again.
“With events quickly escalating in the Middle East and the recent bond selloff pushing long-term yields to new multi-decade highs, policymakers will be reluctant to hike,” Althea Spinozzi, senior fixed-income strategist at Saxo Bank wrote in a research note.
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