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☆ Powell made a big statement this week after bond yields slid. Here’s why
▼ + stars: | 2023-11-12 | by ( Elisabeth Buchwald | ) edition.cnn.com time to read: +5 min

The swift rise in long-term US Treasury yields over the past few months caused headaches for investors by dragging many of their portfolios down. Bond yields, namely the yield on the 10-year Treasury note, dictate the interest rates on credit cards, mortgages and auto loans. Fed Chair Jerome Powell addressed that at this month’s post-meeting press conference, saying he couldn’t pinpoint exactly why yields rose so much in recent weeks. Hours before Powell’s post-meeting remarks, bond yields plunged following the Treasury Department’s quarterly refunding announcement. That’s as opposed to letting bond yields do the Fed’s work for it.

Persons: Jerome Powell, “, Powell, Kathleen O’Neill Paese, Louis Fed, ”, Powell’s, Wall, John Madziyire, Joe Kalish, Ned Davis, Kalish, ” Powell, Celal, That’s Organizations: New, New York CNN, Federal Reserve, Treasury, Fed, Vanguard, Ned, Ned Davis Research, CNN, ” Bank of America, International Monetary Fund, Getty, Bank of America Locations: New York, Washington ,, Anadolu

The U.S. central bank left interest rates unchanged on Wednesday, in line with market expectations. Broadly speaking, higher rates for longer could be an unwelcome turn of events for stocks and bonds. The S&P 500 lost 0.94% on Wednesday, while the yield on two-year Treasuries, which reflect interest rate expectations, hit 17-year highs. Futures tied to the Fed’s policy rate late Wednesday showed traders were betting the central bank would ease monetary policy by a total of nearly 60 basis points next year, bringing interest rates to about 4.8%. Signs of wobbling growth could bolster the case for the central bank to cut rates far sooner than it had projected.

Persons: Sarah Silbiger, Josh Jamner, Gennadiy Goldberg, Jerome Powell, …, David Norris, John Madziyire, ”, Norris, Davide Barbuscia, David Randall, Herbert Lash, Lewis Krauskopf, Ira Iosebashvili, Stephen Coates Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, Federal, U.S, Treasury, U.S ., Clearbridge Investments, TD Securities USA, TwentyFour Asset Management, Thomson Locations: Washington ,, U.S

NEW YORK, Aug 23 (Reuters) - A recent spike in U.S. bond yields has come alongside muted expectations for inflation, a sign to some bond fund managers that economic resilience and high bond supply are now playing a larger role than second-guessing the Federal Reserve. Bond yields, which move inversely to prices, tend to rise in an inflationary environment because inflation erodes the value of a future bond payout. But while higher moves in bond yields in the last several months were often driven by investors pricing in higher interest rates as the Fed sought to tame rising inflation, expectations on the pace of price rises have moved lower in recent weeks. Long-term Treasury yields account for factors such as inflation expectations and term premiums, or what investors demand to be compensated for the risk of holding long-term paper. A recent string of strong economic data despite higher interest rates has strengthened investor beliefs that interest rates will remain higher for longer, even if inflation is tamed.

Persons: Jerome Powell, Jackson, Bond, ”, Calvin Norris, John Madziyire, Anthony Woodside, “, Aegon's Norris, Davide Barbuscia, Megan Davies, Anna Driver Organizations: Federal Reserve, Federal, Aegon Asset Management, Investors, Bank of Japan, BMO Capital Markets, Treasury, Securities, Reuters, Fed, Thomson Locations: U.S, America

For investors who had expected more economic strife, sticking to those calls has become increasingly difficult. "It's going to take longer for rates to rally," said John Madziyire, senior portfolio manager and head of U.S. Treasuries and TIPS at Vanguard Fixed Income Group. "Recession or no recession, we think the probability of higher-for-longer interest rates is far greater than the likelihood of near-term cuts," credit investment firm Oaktree Capital said in a recent note. A re-acceleration in inflation could lead to higher rates than the market has priced in. Some are navigating the uncertainty by combining exposure to higher-yielding short term bonds with long-term bonds in case of a downturn.

Persons: –, Felipe Villarroel, John Madziyire, Oaktree Capital, Danielle Poli, Anthony Woodside, Woodside, Stephen Dover, Chip Hughey, Davide Barbuscia, Richard Chang Organizations: Bond, Federal Reserve, TwentyFour Asset Management, Bank of, Fitch's U.S, Treasury, Oaktree, Fund, Reuters, U.S, Franklin Templeton Investment Solutions, Truist Advisory Services, Vanguard, Thomson Locations: U.S, Oaktree

Things are calmer now, but seven traders who spoke to Reuters, some heading rates desks at big global banks, said March's mayhem continues to reverberate, with fears of further volatility in traditionally stable bond markets muting activity. Investors rely on government bond markets to translate central bank interest rates into a stable benchmark for borrowing costs, from corporate loans to household mortgages. Yield shifts in government bond markets have become bigger - occasionally hitting 20 bps a day - since central banks started ramping up rate hikes last year to tame surging inflation. For some, March's turmoil is the latest sign of how post-2008 regulations constraining dealer balance sheets are affecting bond market functioning. Others noted markets were leaving behind an era of low volatility for good as rates rise.

NEW YORK, April 18 (Reuters) - The U.S. government's deadline to raise the $31.4 trillion debt ceiling could be sooner than expected, raising the prospect of a short-term debt limit extension, analysts said on Tuesday. Meanwhile, on Monday, U.S. House of Representatives Speaker Kevin McCarthy outlined spending cuts his fellow Republicans would demand in exchange for voting to raise the debt limit. "As the debt limit deadline comes into better focus with additional tax receipt data, we expect to see somewhat greater pricing of debt limit risks in financial markets," Goldman Sachs analysts said in a note. The yield on the 2-month U.S. Treasury bill jumped on Tuesday to its highest level since at least 2018, as unease about the U.S. debt ceiling and the likelihood of another interest rate hike took hold. The cost of insuring U.S. debt against default for one year stood at about 95 basis points as of Monday, according to Refinitiv data - well above 2011 levels, when a standoff over the debt ceiling triggered the first credit downgrade of the U.S. government.

☆ Top manager Vanguard bullish on U.S. Treasuries as Fed's hikes near peak
▼ + stars: | 2022-09-19 | by ( Davide Barbuscia | ) www.reuters.com time to read: +4 min

REUTERS/Brendan McDermidNEW YORK, Sept 19 (Reuters) - Vanguard, the world’s second-largest asset manager, believes U.S. Treasuries are near the end of a painful decline even as prices tumble to fresh multi-year lows, a senior portfolio manager at the firm told Reuters. Markets broadly expect the central bank to raise rates by another 75 basis points on Wednesday after already delivering 225 basis points in tightening this year. "If you're positioning for that, you obviously want to be tilted more defensively ... And that by definition means you're leaning more towards Treasuries." Fed funds futures' traders expect interest rates to keep climbing to a high of around 4.4% next March, over 200 basis points higher than the current benchmark overnight interest rate. At the same time, the income earned from higher yields can also help blunt losses if bond prices fall further than expected, he said.

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