Could a hot US job print invalidate the downward trend in bond yields?
The US 10 year is flirting with the massive 4% levels again. A close above it and things could become even more "dynamic" to the upside. Note 21 day right here, while 50 day remains way higher. Source: Refinitiv, TME
10-Year Treasury Yield Options Bet
Ahead of US jobs data, an Options Trader bet $625,000 that the 10-Year Treasury Yield would surge to at least 4.15% by Friday's close. If the yield were to jump to 4.20%, the bet would pay the trader $10 million in profit. Source: Barchart, Bloomberg
Correlation between Equity and Bond returns
Source: BlackRock, Ayesha Tariq, CFA
Everyone enters 2024 long bonds! Consensus is rarely right for a full year
Source: Steno Research, Bloomberg, Macrobond
NEWS - The 1-month T-bill yield in the US surged by 13% in one day, coinciding with a significant increase in Bitcoin (now trading above 45k for the 1st time
Typically, sharp spikes in short-term T-bill yields suggest a large financial entity collapsing. Source: Dump Watcher
Bond trade looks a bit crowded: Record 62% of Fund Managers polled by BofA in December expect bond yields to be lower in 12 months’ time.
Source: BofA, HolgerZ
Going All-In on US Long-Term Bonds for 2024? 📈
In a recent Bank of America survey, when asked which asset would likely excel if the Fed cuts rates in H1'24, an intriguing 26% (earning the top spot) pointed to the Long 30-Year US Treasury. This raises an important question: Is this a sound strategy given the current economic climate? Notably, the preference for long-term bonds comes amid a significant drop in the 30-year US Treasury yield (>100 bps). However, the landscape is complicated by the anticipated heavy Treasury supply in the first quarter, alongside other factors. These include the uncertain economic repercussions of potential fiscal policies from the 2024 US election results (if Trump or another candidate favoring fiscal stimulus were to win), a negative US term premium, and an unusually persistent inverted yield curve in what appears to be a late economic cycle. Moreover, there's a critical consideration often overlooked: in scenarios of Fed rate cuts, the front-end of the yield curve, when adjusted for duration risk, might actually offer a more favorable position. So, is pouring resources into long-term bonds for 2024 a judicious move right now? Are long-term US bonds really the safe haven they’re perceived to be, or should we approach this strategy with a more critical lens? 🤔📊 #InvestmentStrategy #FixedIncome #FinancialMarkets"
Long-Dated Treasuries have officially entered a bull market after $TLT surged higher by more than 20% from the 16-year low it hit on October 23
Source: Barchart
