US Treasuries have the best week of the year

US Treasuries recorded their best week of the year as investors abandoned the highest inflation rate since 2008 and accumulated government debt.

10-year benchmark yield Treasury note fell by 0.103 percentage points to 1.45 percent, marking the largest weekly decline since June last year.

The move was pushed forward by rejection inflation Expectations The 10-year sharp inflation rate this week fell by 0.08 percentage points to 2.34%.

The cooling of long-term inflation expectations came amid data from Thursday showing year-on-year growth in the United States. Consumer prices are jumping up to 5% in June.

This suggests that investors are more willing to accept the mantra of the Federal Reserve that higher inflation will be transient և will be settled when comparisons with last year ‘s closed economy are over.

In: 10 years treasury yield It sank 0.06 percentage points on Thursday, before recovering 0.02 percentage points on Friday.

There has been a sharp shift in most parts of the world government bond market in the last month. Ten-year inflation expectations peaked in early May since 2013, when the 10-year treasury gave 1.70 percent. Many of the fund’s executives have bet that the Fed will have to respond to inflation by soon pushing back its monetary stimulus by buying government-backed Treasury bills, which now stand at $ 120 billion a month.

“People looked at rising inflation last month, thinking that central banks could not just stand idly by,” said Andrea Iannelli, Fidelity International’s director of investment. “But investors are waking up to the fact that this is exactly what they are going to do.”

Analysts say the recent rally has been fueled by short-term gains as investors who placed bets against Treasury earlier this year were forced to throw in the towel as the market moved against them.

Despite this week’s buyout, many investors are still holding short positions, suggesting that the contraction may continue and profitability may decline further, says Ian Lingen, head of US interest rate strategy at BMO Capital Markets.

A survey conducted by BMO last week found that a record 71% of investors believe that the next significant move in the treasury’s profitability will be upward. “We have made a number of inquiries with the lines ‘How much will the current distortions last?'” Lingen said.

(%) Chart showing lower rates underscores freezing fear of inflation

Others expect that this week’s Treasury rally will prove to be transient, while inflation will not.

Under those circumstances, the Fed should soon begin a process of easing the bond-buying slowdown markets, which may meet next week, according to Oliver Onsie, a Capital Economics expert.

The latest rally “may just be a breath of fresh air after a historic quick sell-off” in the first quarter of the year, he said. “We doubt it will.”

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