Bonds are selling off everywhere as traders rethink Fed pathway

Published On Oct 22, 2024, 2:58 AM

Bonds are experiencing a significant selloff globally as traders reassess the Federal Reserve's potential for interest rate cuts. Bond yields are rising, including notable increases in yields for US Treasuries, Australian, New Zealand, and Japanese bonds. The market is reacting to a strong US economy and uncertainty regarding future monetary easing, which could affect yields and deficits. Current predictions suggest that US 10-year yields might reach 4.5% early next year, and potentially 5% depending on upcoming election results. Furthermore, tactical positioning for the elections and concerns about US debt supply are likely to create volatility in the Treasuries market.

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Negative

Given the expected rise in yields owing to slower anticipated interest rate cuts from the Fed and a robust economy, the overall bond market is positioned negatively. Investors are likely to move away from bonds in favor of assets that could offer better returns in a rising rate environment.

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