(Bloomberg) -- Bond traders welcomed their first clear sign of a cooling US labor market, but it’s only a part of what’s needed to fire up the truly sweeping...
-- Bond traders welcomed their first clear sign of a cooling US labor market, but it’s only a part of what’s needed to fire up the truly sweeping rally they’ve been hoping for all year.Worsening Weather Is Igniting a $25 Billion Market
Powell said policy is restrictive enough to eventually tame inflation and also reminded investors that the Fed would react to signs of weakening job creation and wages. That dovish tilt was underlined in the wake of Friday’s employment data, when at one point the US two-year yield fell to 4.7%, some 30 basis points lower than their high for the year of 5.04% reached on Tuesday. The benchmark was at 4.81% on Friday afternoon.
Jennison favors “a steepening trade strategy” in their portfolios, whereby they are overweight two-, three-, and five-year US Treasuries, while being underweight the 10-year note. “It’s hard to call when the long end does become attractive.” “You’re still not seeing term premium come back into the long end and at some point we do think it comes back,” said Karpinski. “On the refunding, they are not increasing auction sizes for now, but if they do rise over time, it’s another factor that can drive yields up in the long end.
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