{"id":131607,"date":"2021-07-08T18:11:29","date_gmt":"2021-07-08T18:11:29","guid":{"rendered":"https:\/\/precoinnews.com\/?p=131607"},"modified":"2021-07-08T18:11:29","modified_gmt":"2021-07-08T18:11:29","slug":"why-are-yields-falling-more-buying-than-selling","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/why-are-yields-falling-more-buying-than-selling\/","title":{"rendered":"Why are yields falling? More buying than selling!"},"content":{"rendered":"
LONDON (Reuters) – Investors confounded by the recent rally in U.S. Treasuries despite inflation running hot in a roaring economy are pointing to the simplest explanation for a move higher in prices: more buying than selling.<\/p> U.S. benchmark 10-year Treasury yields hit 1.25% – their lowest levels since February – on Thursday, the latest leg lower in a move that has left many an investor scratching their heads.<\/p>\n Bonds are typically expected to be sold in a reflationary environment, normally forcing yields – which move inversely to prices – higher. But the behaviour of bond markets in recent days is at odds with other financial markets: only on Wednesday, U.S. stocks as measured by the S&P 500 index hit record highs.<\/p>\n Some point to an ongoing rethink of the reflation narrative and a sense that economic growth may have peaked. Others say the explanation is merely technical.<\/p>\n The following graphic shows, on a 3-month moving average basis, Federal Reserve purchases of Treasuries against net issuance of Treasury securities. For an interactive version, click here tmsnrt.rs\/3dYsAid.<\/p>\n Graphic: More buyers than sellers? –<\/p>\n Since April this year, the gap between Fed purchases and net issuance has significantly narrowed, with issuance falling below purchases at one point in May.<\/p>\n \u201cEssentially the Fed has been taking down all of the net supply of Treasuries, so I think this has been a bit of a supply … a short squeeze, if you will, on the Treasury market,\u201d said Jeffrey Schulze, investment strategist at ClearBridge Investments.<\/p>\n May\u2019s dip in the 3-month moving average of net Treasury issuance was lower than levels in March 2020, although the pace seems to be picking up again.<\/p>\n \u201cThis is an extremely rare event in a QE world and also remarkable given it\u2019s coincided with the biggest fiscal giveaway in history,\u201d said Deutsche Bank\u2019s Jim Reid and Henry Allen in a research note.<\/p>\n Part of the reason for the drop-off in Treasury issuance is explained by the U.S. Treasury\u2019s decision last year to front-load borrowing with a large issuance of 7-30 year bonds.<\/p>\n HSBC\u2019s rates strategists in May said they forecasted 1% yields for the 10-year U.S. Treasury for end-2021 and end-2022, with a \u201cpossible prompt\u201d coming from the narrative \u201cshifting away from larger deficits and increased supply\u201d.<\/p>\n