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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive summary:
- The constant positive ‘surprise’ in inflation in the past year has led to a sharp tightening in financial conditions in the past 6 months.
- However, periods of sharp tightening have been followed by a consolidation in LT bond yields.
- LT bond yields ‘generally fall’ when the Fed ends QE. The last post-Covid POMO conducted by the Fed was in March 2022. Is the US 10Y Yield about to reverse?
Link to full publication:
Risk reward skewed toward lower US LT yields?
There is possibility that the trend in US LT bond yields continues in the near to medium term as inflation remains elevated in most of the DM and EM economies. However, periods of sharp tightening have been followed by a consolidation in LT bond yields.
The chart below shows that US LT bond yields tend to follow a ‘mean – reverting’ process. It shows the 6M change in the US 10Y yield. A 150bps+ retracement in the 10Y yield has happened only four times in history and has generally been followed by a sharp reversal in the next 6 to 12 months.
With recession risks surging globally and geopolitical uncertainty remaining elevated, preference for the traditionally safe US Treasuries could start in the near to medium term.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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