Source: Wall Street News
Vanguard believes that the 10-year yield on US bonds breaking through the 4.75% mark may trigger a large-scale sell-off; Macquarie believes that the 5% yield level “may be within reach within the next few weeks.”
The number of first-time US unemployment claims announced on Thursday night was slightly lower than expected. The Philadelphia Federal Reserve's corporate outlook index for April was better than expected, and US bonds once again began a downward trend. The 10-year yield was about 4.61%, up 2.2 basis points during the day.
We are still experiencing the US debt storm in the second half of last year. Will the 10-year yield return to 5% now?
According to media reports on Thursday, Wall Street has warned that the 10-year US Treasury yield is at risk of jumping back to 5%. Ales Koutny, head of interest rates at asset management giant Vanguard, said:
We are now in dangerous territory, and a yield above the 4.75% key level could trigger a massive sell-off, which will push the yield to a high of 5% in 2007.
Koutny said that breaking through 4.75% may force many investors to close their positions and limit losses. If this part of the position is not handled in an orderly manner, then this disorderly change may eventually cause 10-year US bonds to fall to 5%.
Meanwhile, Thierry Wizman, Macquarie's global forex and interest rate strategist, believes:
Considering that the US nominal GDP growth outlook for October last year seemed relatively weak, the inflation rate was falling, and the 10-year yield reached a high of 5%, the 5% yield level “may be within reach within the next few weeks.”
Wizman said that after Federal Reserve Chairman Powell's speech on Tuesday, the benchmark 10-year Treasury yield could easily reach 4.75%. Powell said that in view of the lack of “confidence” that the inflation rate can continue to return to the Fed's 2% target, interest rate cuts may be postponed.
At the end of last year, investors poured into the US bond market, betting that the Federal Reserve would quickly launch an easing cycle. However, as new data shows that the US economy continues to strengthen, traders are putting off their bets on the Federal Reserve to begin an easing cycle. Interest rate cuts are expected to begin in September, much later than June, which was expected a month ago.
Over the past week, high inflation has exacerbated the collapse of US bonds. The 10-year bond yield jumped to nearly 4.7% on Tuesday, the highest level since the beginning of January, before falling back to 4.57% on Thursday.
Edit/evans