Bonds

Federal Reserve officials are more seriously discussing the possibility that they may not have to stop shrinking their massive balance sheet when they begin cutting interest rates, a readout from their most recent policy meeting showed. 

The yield on 30-year securities has climbed almost 25 basis points over the past three sessions, returning it to levels last seen in mid-November when inflation was still above 7%, more than double the current rate. Ten-year borrowing costs rose to around 4.15%. 

Wall Street securities dealers expect a glut of Treasury sales to start coming soon as the government steps up its borrowing.

In their latest assessment of the bond market outlook, Morgan Stanley strategists are challenging the former head of the Federal Reserve Bank of New York's view that losses are likely to deepen.

Bond traders have overestimated month-over-month headline inflation heading into four of the last seven Consumer Price Index releases, says strategist Raghav Datla.

Two-year Treasury yields slid a percentage point over three days in March, the most since 1982. Gone are the days when inflation was the main menace.

Excess returns on the bonds, which compares mortgage backed security performance to Treasuries, are -0.94% for March, on track for the worst relative performance since September.

The shift in short-term interest rate markets Monday was unlike almost anything seen for more than four decades, including even the 2008 financial crisis and the aftermath of the Sept. 11 terror attacks. 

But even if plowing back into Treasuries proves to be a winning trade, sticking with it won't be for the faint of heart. 

U.S. government bonds slid across the curve, with the 10-year rate heading for the highest close since Nov. 9.