Bonds

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.

Only about $4.27 billion of the bonds have been issued so far this year, down from $29.38 billion at this same point last year, according to data compiled by Bloomberg based on deals without government backing.

Bond traders are girding for the risk that Federal Reserve Chair Jerome Powell is ready, willing and able to plunge the U.S. into recession to get the inflation bogey under control.

Yields have jumped so much this year, nearly doubling those on 10-year Treasuries, that it recalls past buying opportunities that paid off when the tide turned.

U.S. Treasuries tumbled Monday, driving the yield on five-year notes to the highest level since September 2008 amid speculation persistent inflation will prompt the Federal Reserve to tighten policy more aggressively.

Stocks wavered while bonds fell as investors braced for the biggest Federal Reserve hike since 2000 and awaited more clues on how aggressively the central bank will tackle inflation.

Traders of U.S. government debt were dealt a stern reminder last week not to sleep on a market that’s been headed in one direction for a long time.

The Federal Open Market Committee is all but certain to raise rates by a quarter percentage point at the conclusion of its two-day policy meeting.

Executives speak on the uncertainty created by the Russia-Ukraine war and Federal Reserve announcements.

The surging volatility in the world’s biggest bond market is challenging traders trying to play both tighter global monetary policy and a war-induced commodity price shock that’s raising the specter of 1970s-style stagflation.

After a tumultuous week of big yield swings and heightened volatility in the U.S. Treasury market, investors are bracing for another hot inflation report, while the war in Ukraine increasingly casts a pall over Europe and the global economy.

“This puts the performance of inflation solidly back into the limelight” with the “risk that higher prices with the backdrop of heightened geopolitical uncertainty will ultimately be stagflationary.”

The Federal Reserve’s shift toward a major reduction of its footprint in the U.S. bond market this year has upended expectations for sustained cutbacks to the Treasury’s quarterly sales of longer-term debt, forcing dealers to gird for bigger auction sizes down the road.

Treasury yields rose a second day amid increasing conviction that the Federal Reserve will raise rates at least three times beginning in May.

In order to complete the monthly cycle of two-, five- and seven-year notes before Thursday’s holiday, the Treasury Department is cramming them into Monday and Tuesday, which hasn’t gone well in the past.

A majority of the 49 economists in the survey predicted the U.S. central bank will begin the taper in November and wrap it up by mid-2022, curbing the current $120 billion monthly buying pace by reducing Treasuries by $10 billion a month and mortgage-backed securities by $5 billion.

In a recent note to clients, JPMorgan strategists including Nikolaos Panigirtzoglou noted that inflation surprises are likely to persist into 2022 as supply bottlenecks and commodity price rallies continue.

If progress toward the Fed’s employment and inflation goals “continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted,” the U.S. central bank’s policy-setting Federal Open Market Committee said Wednesday.