Futures prices linked to 10-30 year US Treasuries rose on the 29th. Futures trading is thin as the cash bond market is closed for Memorial Day. A series of factors that are likely to support the market in the market on the 30th after the holidays are attracting attention.
One of them is that the Federal Open Market Committee (FOMC) will raise interest rates at its June or July meeting.Observations are widespread. If the bill on the debt ceiling passes Congress, Treasury bills (There is also a prospect that a large amount of T Bills will be issued at once. That could drain liquidity from the market and undermine the performance of risky assets. Additionally, as this week marks the final week of May, month-end-specific Treasury index rebalancing is expected in preparation for large quarterly issuance of 10- and 30-year bonds, which could boost demand in the sector. There is
U.S. Treasury yields reached their highest levels since early-to-mid-March as of Friday, 26 March, largely erasing the decline caused by higher lending standards triggered by the bankruptcies of regional banks. The 10-year bond yield rose above 3.85%. In April, it fell below 3.25%, the lowest for the year. The rise in yields in recent weeks has been dominated by short-term bonds, reflecting broader expectations of rate hikes.
In theory, the debt deal could act to dampen economic activity, which could boost demand for long-term bonds, said Andrew Brenner, head of international fixed income at NatAlliance Securities.
“It’s going to take money out of the economy at the federal level,” Brenner said. But judging by yesterday’s yield levels, short positions in Treasury bonds are likely to build up, and buybacks will come when the market rises, he said.
Trends in Treasury futures prices suggest long-term yields will fall when markets reopen on Friday, while short-term yields will remain near multi-month highs.
Original title:Long-Dated Treasury Futures Rally in Wake of Debt-Ceiling Accord(excerpt)
2023-05-29 16:08:00
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