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US Bonds Are On Best Run Since March

Fed’s preferred inflation reading boosted wagers on rate cuts

US Treasuries are posting more than 3% of returns year-to-date

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Bloomberg chart

Treasuries are set to book a fourth-straight week of gains — the best winning streak since March, on building investor confidence that the Federal Reserve will begin cutting interest rates next quarter.

Rates oscillated Friday amid light pre-holiday trading after a report showed the Fed’s preferred gauge of underlying inflation barely rose in November, endorsing a growing narrative that central bankers have successfully broken the back of price pressures and will aggressively ease monetary policy in 2024.

Across 2024, traders are penciling in nearly 160 basis points of rate reductions, more than twice as much as Fed officials signaled earlier this month in their new round of quarterly forecasts.

“The slowest rate of year-over-year core inflation in almost three years cements the next macro question on the timing of the cut from the Fed — even if we maintain a Q1 move lower in the target band is too soon,” BMO Capital Markets strategist Benjamin Jeffery said in a note.

Image: US Bank