(Bloomberg) -- With Treasuries on track for their worst month this year, a hefty slate of auctions looms as a major test of whether yields have peaked after ...
-- With Treasuries on track for their worst month this year, a hefty slate of auctions looms as a major test of whether yields have peaked after reaching the highest levels of 2024.The Fed’s Forecasting Method Looks Increasingly Outdated as Bernanke Pitches an Alternative
“A Fed that sticks to their guns and says, ‘We are going to break inflation,’ means there’s a top in yields,” the portfolio manager said. “Yields will spike higher if the Fed backs off too soon and cuts.”The two-year note ended last week at about 4.99%, so Tuesday’s auction has a chance to obtain a coupon of at least 5% on the maturity for the first time since last year. Before then, investors hadn’t seen such levels in more than a decade.
Still, there’s ample evidence of demand emerging. Last week’s 20-year auction, which brought yields at the second-highest level on record, was well received. And the latest client survey from JPMorgan Chase & Co. showed investors were net long on Treasuries by the most in several weeks. “The two-year is attractive around 5%, despite being lower than bill yields and the stronger-than-expected CPI prints, as the Fed’s base case continues to be to cut rates,” said Priya Misra, a portfolio manager at J.P. Morgan Asset Management.
“The process of shifting from cash to some part of fixed income probably goes in stages and starts with a move into shorter maturities first,” said Brandywine’s McIntyre.
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