U.S. Treasury Buyers Face Renewed Selloff as Rate Hike Expectations Rise
U.S. inflation data for October exceeded expectations, while Federal Reserve officials signaled a tighter policy stance, raising concerns about a large rate hike in December. Investors who returned to U.S. Treasuries in November faced another selloff, and analysts worry that selling pressure will persist when trading resumes on November 12.
After a sharp selloff in October, some investors bought U.S. Treasuries again in November as oil prices fell and bond prices rebounded. But signs of persistent U.S. inflation and comments from Federal Reserve officials put the Treasury market under renewed pressure. On November 10, concerns that the Fed might raise rates by 0.5 percentage points at its December meeting pushed Treasury yields higher.
File photo related to the U.S. Treasury market.（VietVance）
The October consumer price index released by the U.S. Department of Labor on November 10 was higher than expected. Before the data was released, Fed Governor Christopher Waller said he supported a 0.5 percentage point rate increase if inflation remained high. Dallas Fed President Lori Logan later said the Fed might need two more rate increases before pausing to assess conditions.
Rate hike expectations drove the two-year U.S. Treasury yield to its largest increase in 19 months, while the ten-year yield briefly exceeded 5%. By the close on November 10, the ten-year yield had risen to 4.992%, the two-year yield to 4.736%, and the 30-year yield to 5.352%. The U.S. Treasury market was closed on November 11 for Veterans Day, and analysts worried that selling pressure would continue when trading resumed on November 12.
A November 8 report by Bank of America Corp. showed that, over the previous week, asset managers continued adding long futures positions in U.S. Treasuries across maturities and closed some bearish positions in longer maturities. Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle Investments, said that if expectations of faster Fed tightening grew, the two-year Treasury yield could return to the level near 5% seen in late September.
Source: VietVance
