U.S. Treasury bonds have experienced significant turbulence in recent times, with rising yields and market volatility. However, there are three supportive arguments for the battered US Treasury market.
Despite the recent losses, further downturns may be much smaller due to higher yields and the "duration" math associated with Treasury bonds. This means that if any losses continue, they are likely to be significantly less severe than what investors have already endured.
One of the reasons for the resilience of US Treasury bonds is the upcoming auction of new 10-year notes. As the market awaits this critical event, Treasury bonds remained steady in overnight trading.
Morgan Stanley stands firm in its recommendation to buy government bonds, providing another supportive argument for US Treasury bonds. The financial giant believes that the market may be too optimistic, making US sovereign debt an attractive investment.
Ed Yardeni, a renowned economist, predicts that the 10-year Treasury yield will hover around 4.25%-4.5%. This projection is driven by the government's need to finance its widening deficit, which contributes to the attractiveness of Treasury bonds.
Morgan Stanley's stance counters the prevailing bearish sentiment towards Treasury bonds. The firm encourages investors to consider buying US sovereign debt, highlighting potential market over-optimism.
Retail bond sales serve the purpose of pressuring banks to increase savers' interest rates. This aspect adds to the supportive environment for US Treasury bonds.
The post Labor-day rush of bond issuance by US investment-grade-rated companies has led to renewed pressure on long-end US Treasuries. Despite this, the market resilience of Treasury bonds remains steadfast.
Treasury bill yields continue to exceed 5% following an interest rate hike by the Federal Reserve. Investors are advised to stay informed about the implications of this development.
