Considering that yields have reached record highs, has the US bond market bottomed out? Can we read the bottom now?

Since the beginning of summer this year, the fund company Direxion's$Direxion Daily 20+ Year Treasury Bull 3X Shares ETF (TMF.US)$(TMF for short) is being sought after by more and more investors. Recently, capital inflows have reached a record high. Many people think that the US bond market has bottomed out and can begin to bottom out.

Last Friday, this $4 billion ETF absorbed a record $205 million, and since June 1, TMF's net inflow has nearly doubled to 2.5 billion US dollars.

However, in the longer term, the fund's performance can be described as very poor.

TMF has risen nearly 50% since its low in October this year, but if you look at the rebound in the US bond market in early 2020, the ETF's performance is still poor, and long-term returns are very disappointing.

Notably, from BlackRock$iShares 20+ Year Treasury Bond ETF (TLT.US)$In this performance, investors can also see the potential for the bond market to bottom out and rebound.

Although TLT's performance has been extremely poor in the past two years, by 2023, its revenue had increased by 21 billion US dollars, reaching 48 billion US dollars, making it the fourth largest treasury bond ETF in the US, ranking 29th overall.

Since late October, 10-year US Treasury yields have been declining, with a cumulative decline of 75 basis points up to now.

So, is now the best time to bottom out US debt?

Analysts believe that if the interest rate cut of about 130 basis points next year, which is currently priced by the market, is actually achieved, the answer is yes, but currently Powell does not seem willing to consider cutting interest rates. In a speech in early December, he said that it is still too early to determine that the Fed has raised interest rates or speculates on interest rate cuts.

As a result, Deutsche Bank analysts warned that this week's Fed interest rate meeting could shake up the bond market's gains over the past month.

As our US economists write, they expect the Fed to send a signal of a “soft” austerity trend. The bitmap shows that interest rates will be cut by only 50 basis points in 2024. This will challenge market expectations and may prompt plenipotentiaries to cut their high positions.

Nick Timiraos, a well-known financial journalist known as the “New Federal Reserve News Agency”, also believes:

It is unlikely that Fed officials will have serious discussions on when to cut interest rates this week. Unless the level of economic weakness exceeds expectations, it will not be possible for the next few months (serious discussions).

Editor/Corrine