Can the Federal Reserve cut interest rates twice before the end of the year? Traders are becoming increasingly uncertain
yoyn
发表于 2024-10-14 10:11:42
3692
0
0
① As the prospects for the Federal Reserve's interest rate cut path become increasingly uncertain, bond investors are now taking defensive measures Last week, higher than expected US CPI and mixed labor market indicators led traders to further reduce their bets on the Fed's annual rate cuts, while also pushing the 10-year Treasury yield to its highest level since July.
As the prospects for the Federal Reserve's interest rate cut path become increasingly uncertain, bond investors are now taking defensive measures.
Last week, higher than expected US CPI and mixed labor market indicators led traders to further reduce their bets on the Fed's annual rate cuts, while also pushing the 10-year Treasury yield to its highest level since July.
The Bank of America MOVE index, a closely watched measure of expected volatility in US Treasury bonds, has risen to its highest level since January.
Interest rate market traders currently estimate that the likelihood of the Federal Reserve keeping interest rates unchanged at a meeting in November or December is about 20%. As a comparison, before the release of the non farm payroll report in September, a combined 50 basis point interest rate cut from two meetings was once seen as a certainty in the industry.
At the same time, the activity in derivative markets such as options indicates that investors are hedging against a situation where the Federal Reserve has reduced the number of interest rate cuts: the recent surge in demand for guaranteed overnight funding rate (SOFR) options is focused on contracts targeting the Fed's only one rate cut this year. Some extreme bets even expect the Federal Reserve to pause its easing cycle early next year.
In the past week, the price of US treasury bond bonds has fallen sharply. The Bloomberg US bond index weakened for the fourth consecutive week and recorded the largest decline since April. The yield of 10-year treasury bond rebounded to above the 4% threshold, and the yield of 30-year treasury bond hit 4.42%, the highest level since July 30.
In last Friday's US Treasury options trading, several noteworthy put option trades were attempting to bet that the yield curve would become steeper. The target of a put option on 10-year treasury bond is that the yield will rise to about 4.5% before the maturity date on November 22, and several other large transactions are expected to reach about 4.75% at that time.
Kit Juckes from BNP Paribas wrote in a report, "The market is clearly uncertain about the outcome of the next few Federal Reserve decisions, and from the rapid rise of 10-year Treasury yields by nearly 50 basis points since mid September, the market is increasingly certain that the US economy will not have a 'hard landing'. This suggests a view that the likelihood of a 'no landing' is as high as a 'soft landing', which raises concerns that if fiscal tightening measures are not implemented, inflationary risks may reappear
How to allocate investments requires careful consideration
In this context, many industry insiders seem to find it difficult to decide whether to deploy cash in the short or long end of the world's largest bond market, making the middle of the relatively less risky curve a safe haven in the eyes of some investors.
In order to reduce vulnerability to economic recovery, potential fiscal shocks, or US election turmoil, asset management companies including giants such as BlackRock, PIMCO, and UBS Global Wealth Management are currently advocating for the purchase of five-year bonds, as they are less sensitive to such risks compared to shorter or longer similar bonds.
Solita Marcelli, chief investment officer of UBS Global Wealth Management in the Americas, suggested investing in medium-term bonds, such as treasury bond bonds and investment grade corporate bonds with a maturity of about five years. Marcelli said, "We continue to advise investors to prepare for a low interest rate environment by allocating excess cash, money market holdings, and soon to expire fixed deposits to assets that can provide more sustainable income
The US bond market will be closed on Monday for Columbus Day. However, in the coming weeks, it is clear that there may still be significant volatility in the bond market - not just related to the US election.
Due to investors waiting for the release of quarterly bond issuances by the US Treasury Department (expected to remain stable in size), the next monthly non farm payroll report, and the Federal Reserve's interest rate decision on November 7th, some industry insiders have predicted that the volatile market may continue for several weeks.
Citadel Securities warns clients to be prepared for so-called 'significant future volatility' in the bond market. The company expects the Federal Reserve to only cut interest rates by another 25 basis points in 2024.
David Rogal, portfolio manager of BlackRock's fundamental fixed income division, also stated that "as the election enters the window of options games, implied volatility will rise". The company prefers medium-term treasury bond because it believes that as long as inflation cools down, the Federal Reserve will readjust its policy cycle and push the policy interest rate from 5% to between 3.5% and 4%.
Of course, with the 10-year US Treasury yield, known as the "anchor of global asset pricing," returning to a high of around 4.1%, the current sell-off in the bond market is also causing some long-term investors to believe that the "buying zone" has arrived.
Our core view is that due to the Federal Reserve's policy remaining restrictive, the economy will indeed slow down next year. This means that for the company, there is an opportunity to extend the maturity of our investment portfolio when the 10-year yield exceeds 4%, while considering the downward trend in growth next year, "said Roger Hallam, Global Interest Rate Head at Vanguard Group, in an interview
He added that this will gradually shift the company towards a greater emphasis on bonds.
CandyLake.com 系信息发布平台,仅提供信息存储空间服务。
声明:该文观点仅代表作者本人,本文不代表CandyLake.com立场,且不构成建议,请谨慎对待。
声明:该文观点仅代表作者本人,本文不代表CandyLake.com立场,且不构成建议,请谨慎对待。
猜你喜欢
- Interest rate cuts are imminent! Inventory of market performance after previous Fed interest rate cuts
- He Xiaopeng: The production capacity of Xiaopeng MONA M03 has been decided to expand twice within 10 days
- The Chairman of the Federal Reserve speaks out loudly! This year, there may be two more interest rate cuts
- How will 'Trump 2.0' affect the prospect of Fed interest rate cuts? One article comprehension
- Can the Federal Reserve cut interest rates next month? Tonight's crucial test has arrived
- Will it come true? The first institution to predict the Fed's suspension of interest rate cuts in December appears
- What signal does Jack Ma send by appearing twice within a month?
- Rare 'nine consecutive drops'! What happened? The Federal Reserve may implement a 'hawkish interest rate cut'
- The Federal Reserve announced a 25 basis point interest rate cut and expects to slow down the pace of rate cuts next year
- Interpretation of the Federal Reserve's December Resolution: 'Three consecutive cuts' as scheduled, expected to only cut interest rates twice next year!
-
生成式人工知能(AI)が巻き起こす技術の波の中で、電力会社は意外にも資本市場の寵児になった。 今年のスタンダード500割株の上昇幅ランキングでは、Vistraなどの従来の電力会社が注目を集め、株価が2倍になってリ ...
- xifangczy
- 3 天前
- 支持
- 反对
- 回复
- 收藏
-
隔夜株式市場 世界の主要指数は金曜日に多くが下落し、最新のインフレデータが減速の兆しを示したおかげで、米株3大指数は大幅に回復し、いずれも1%超上昇した。 金曜日に発表されたデータによると、米国の11月のPC ...
- SNT
- 前天 12:48
- 支持
- 反对
- 回复
- 收藏
-
長年にわたって、昔の消金大手の捷信消金の再編がようやく地に着いた。 天津銀行の発表によると、同行は京東傘下の2社、対外貿易信託などと捷信消金再編に参加する。再編が完了すると、京東の持ち株比率は65%に達し ...
- SNT
- 前天 12:09
- 支持
- 反对
- 回复
- 收藏
-
【ビットコインが飛び込む!32万人超の爆倉】データによると、過去24時間で世界には32万7000人以上の爆倉があり、爆倉の総額は10億ドルを超えた。
- 断翅小蝶腥
- 3 天前
- 支持
- 反对
- 回复
- 收藏