(Bloomberg) -- The bond trade that some of Wall Street’s biggest banks say will dominate the rest of 2024 is gaining steam before a crucial inflation reading...
-- The bond trade that some of Wall Street’s biggest banks say will dominate the rest of 2024 is gaining steam before a crucial inflation reading that will help seal the wager’s fate.Boeing to Plead Guilty to Fraud for Violating Deal Over 737 Max CrashesThe bet — that the US yield curve will normalize toward a steeper slope — is suddenly looking as good as it has in months, with traders eyeing the latest print of the consumer-price index due this week for additional support.
The trade was a market favorite around the turn of the year as well, as investors entered 2024 betting on a series of Fed rate cuts. Instead, a resilient economy and sticky inflation derailed wagers on easing. When the US bond market closed on June 27 hours before the debate, the difference between 5- and 30-year yields was about 5 basis points narrower relative to the end of the year. The trade, in other words, was a loser.
Goldman Sachs Group Inc. strategists are also skeptical toward the steepener. They expect the 5- to 30-year gap to be basically unchanged in the fourth quarter from current levels. Greg Wilensky, head of US fixed income at Janus Henderson Investors, said he’s “moderately” positioned for a steeper curve by being overweight the five-year part of the curve and underweight longer maturities. The state of the economy will be the main trigger for the strategy, rather than politics, he said.
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