{"id":133204,"date":"2021-07-23T21:26:38","date_gmt":"2021-07-23T21:26:38","guid":{"rendered":"https:\/\/precoinnews.com\/?p=133204"},"modified":"2021-07-23T21:26:38","modified_gmt":"2021-07-23T21:26:38","slug":"five-metrics-bond-investors-are-watching-as-covid-fears-return","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/markets\/five-metrics-bond-investors-are-watching-as-covid-fears-return\/","title":{"rendered":"Five metrics bond investors are watching as COVID fears return"},"content":{"rendered":"

NEW YORK (Reuters) – A wild week in Treasuries has investors parsing the cross-currents that may sway prices for U.S. government bonds in coming weeks, including the Federal Reserve, economic data and investor positioning.<\/p>

FILE PHOTO: A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS\/Thomas White\/Illustration\/File Photo<\/figcaption>

The yield on the benchmark 10-year U.S. Treasury, which moves inversely to bond prices, recently stood at 1.28% on Friday, after falling as low as 1.128% earlier in the week, nearly 65 basis points below its 2021 high on worries over slowing growth and spreading COVID-19 infections.<\/p>\n

Flows into the iShares 7-10 Year Treasury Bond ETF hit around $1.2 billion in the week ending July 21, their highest in a year according to Lipper, illustrating the demand for U.S. government bonds.<\/p>\n

One of the key questions now hanging over markets is whether Treasury yields will continue moving toward 1% – revisiting the levels they touched during the pandemic – or rebound toward 2%, a level many participants expected to see by year-end.<\/p>\n

Here are some indicators investors are watching to determine the course of the Treasury market.<\/p>\n

GRAPHIC: A sooner rate hike –<\/p>\n

TAPERING TALK<\/h2>\n

The Federal Reserve surprised many market participants with a hawkish shift at its June policy meeting, with its so-called dot-plot showing some officials moving up expectations of their first rate hikes to 2023.<\/p>\n

With the Fed\u2019s policy meeting concluding on July 28 and the central bank\u2019s annual symposium at Jackson Hole scheduled for late August, investors will be watching for signs that officials are backpedaling on assurances that the current bout of inflation is transitory, a message that could rattle markets.<\/p>\n

Investors will also be looking for signals on whether officials believe the Delta variant of COVID-19 may pressure growth, potentially delaying the unwinding of the Fed\u2019s easy-money policies and depressing yields.<\/p>\n

GRAPHIC: Treasury yield and high-yield spreads –<\/p>\n

YIELD SPREADS<\/h2>\n

While Treasury yields have slid, the spread between Treasuries and high-yield bonds has remained steady. That suggests that some investors remain bullish on the economy overall, while short-term factors such as positioning and supply are driving the rally in Treasuries, said Jonathan Golub, chief U.S. equity strategist at Credit Suisse, in a report.<\/p>\n

GRAPHIC: Speculative positioning –<\/p>\n

SHORT INTEREST<\/h2>\n

Leveraged funds – including hedge funds – have piled into bearish bets on U.S. Treasuries as part of the so-called reflation trade, which saw investors position for lower yields and buy shares of companies that could benefit from a powerful rebound in growth. [L1N2OX2MM]<\/p>\n

While net speculative bets on 10-year Treasury futures flipped into bullish territory for the week ended July 13, those on other maturities, including 30-years, remained bearish, data from the Commodity Futures Trading Commission showed.<\/p>\n

A reversal in that positioning could fuel Treasury gains and drag yields lower.<\/p>\n

GRAPHIC: Citi economic surprise index –<\/p>\n

ECONOMIC DATA<\/h2>\n

While the economy continues to rebound from last year\u2019s swoon, worries that the pace of growth is slowing contributed to the rally in Treasuries earlier this week.<\/p>\n

Citigroup\u2019s U.S. Economic Surprise Index, which measures the degree to which the data is beating or missing economists\u2019 forecasts, stands at 11.6, compared with its record high of 270.8 touched in 2020.<\/p>\n

Praveen Koropaty, U.S. interest rate strategist at Goldman Sachs, believes the Fed will want to see the employment reports from July, August and September before committing to an unwinding of its easy money policies.<\/p>\n

At some point in November or December, \u201cthe Fed will announce a taper and I don\u2019t think the market will freak out as it will be well telegraphed,\u201d he said.<\/p>\n

GRAPHIC: Breakeven inflation rates –<\/p>\n

BREAKEVEN INFLATION RATES<\/h2>\n

Breakeven rates – the spread in the yield between a Treasury note and a Treasury Inflation Protected Security of the same duration – are narrowing, a sign that investors are showing more faith in the Federal Reserve\u2019s estimate that high inflation will be transitory, wrote Craig Johnson, chief market technician at Piper Sandler.<\/p>\n

\u201cThe rout in commodity markets and pullback in reflation momentum is giving the Fed\u2019s forecast additional credibility,\u201d he said.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

NEW YORK (Reuters) – A wild week<\/p>\n","protected":false},"author":3,"featured_media":133203,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23054],"tags":[],"yoast_head":"\nFive metrics bond investors are watching as COVID fears return - Pre Coin News<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/precoinnews.com\/markets\/five-metrics-bond-investors-are-watching-as-covid-fears-return\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Five metrics bond investors are watching as COVID fears return - Pre Coin News\" \/>\n<meta property=\"og:description\" content=\"NEW YORK (Reuters) – A wild week\" \/>\n<meta property=\"og:url\" content=\"https:\/\/precoinnews.com\/markets\/five-metrics-bond-investors-are-watching-as-covid-fears-return\/\" \/>\n<meta property=\"og:site_name\" content=\"Pre Coin News\" \/>\n<meta property=\"article:published_time\" content=\"2021-07-23T21:26:38+00:00\" \/>\n<meta name=\"author\" content=\"mediabest\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/precoinnews.com\/wp-content\/uploads\/2021\/07\/Five-metrics-bond-investors-are-watching-as-COVID-fears-return.jpg\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"mediabest\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/precoinnews.com\/markets\/five-metrics-bond-investors-are-watching-as-covid-fears-return\/\",\"url\":\"https:\/\/precoinnews.com\/markets\/five-metrics-bond-investors-are-watching-as-covid-fears-return\/\",\"name\":\"Five metrics bond investors are watching as COVID fears return - 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