Amid significant fluctuations in Technology stocks this week, the market's expectations for the Federal Reserve to further loosen MMF policy have begun to rise. Risk-averse sentiment has pushed the two-year USA Treasury yield to its lowest level in over a month, triggering a wave of bets on the rise of USA Treasury bonds.
This week, as the Federal Reserve announced its latest interest rate decision, Bonds traders increased their bullish bets on US Treasury bonds.
According to Bloomberg data, despite the expectation that the Federal Reserve will keep interest rates unchanged this week, the swap market currently estimates the probability of a rate cut in March to be around 30%. As inflation remains stubborn, the market is focusing on Federal Reserve Chairman Powell's press conference, hoping to gain insights into the policy direction for the coming months.
The market has high hopes for Powell's subsequent hints of a rate cut. Against the backdrop of significant fluctuations in technology stocks this week, expectations for the Federal Reserve to further ease MMF policies have begun to rise. Risk aversion has pushed the two-year US Treasury bond yield to its lowest level in over a month, triggering a wave of bets on the rise of US Treasury bonds.
JPMorgan's latest client survey on Tuesday showed that, in the week ending January 27, JPMorgan clients' net long positions in Bonds rose to the highest level since October 2010, indicating that investors' bullish sentiment towards US Treasury bonds is warming.
The bets on a possible rate cut in March are reasonable.
The cooling inflation data in December, along with Federal Reserve Governor Christopher Waller's statement earlier this month regarding a possible rate cut before mid-year, support this expectation. However, President Trump's tariff policy and its impact on the economy remain a significant source of uncertainty.
Citigroup Analyst Edward Acton stated in a recent report that, given the lack of clarity on tariff issues, Powell may downplay the possibility of a rate cut at the March meeting.
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