Treasuries stalled as a rebound in global stocks reduced demand for haven assets, while Federal Reserve Chairman Kevin Warsh's comments did little to shift interest rate outlook. Long-term Treasury yields rose more than five basis points before paring gains after technology stocks stumbled at the US market open in New York. Short-term yields erased increases when stocks opened.
Earlier, Treasury yields touched multi-week lows on expectations the US government will curb supply of long-maturity debt starting next month, with survey questions due at 12 p.m. in Washington addressing that possibility. Market expectations for the Fed to hold rates steady this month and raise them in December remained intact. In a moderated discussion Friday morning in Bangkok at the IMF’s annual meetings, Warsh was silent on monetary policy or the US economy outlook, leaving Treasuries at the mercy of improving global risk appetite.
This reversed Thursday’s sentiment, when AI-related share selloffs drove investors to safe-haven US debt. Leejun Foo, fixed income strategist at Mizuho International, noted the selling was in the long-end, driven by higher growth, inflation, and fiscal concerns. Swaps fully priced three more quarter-point hikes over the next 12 months, with the chance of a December hike falling from 30% to 20% after Warsh’s remarks.
Steven Barrow, head of G10 strategy at Standard Bank, said the short-lived Treasury rally suggests the safe-haven status of US bonds is waning, as diversified global investors shift into equities over bonds amid persistent inflation and rising borrowing needs.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing