U.S. Treasuries are poised to come in even despite having a very volatile first six months of 2024.
A Bloomberg index of returns in this bond market has declined a mere 0.1% for the year. It fell as much as 3.4% in April.
The rebound indicates that investor outlook might be positive in light of falling U.S. prices prompting the Federal Reserve to cut interest rates sooner.
"We've seen the peak in yields," Stephen Miller, investment strategist at GSFM in Sydney, told Bloomberg. "Bonds are now back as having a deserved place in a multi-asset portfolio."
Treasuries have been sent in opposite directions in 2024 as policy-sensitive two-year yields have soared above 5% in April as fears over higher-for-longer U.S. rates spurred investors to dump bonds.
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They have since returned to around 4.7% as inflation-to-retail-sales data suggested the U.S. economy may finally be cooling enough to justify lower borrowing costs.
Fed Governor Adriana Kugler said on Tuesday that it will likely be appropriate for the central bank to reduce rates "sometime later this year" if economic conditions unfold as anticipated.
St. Louis Fed President Alberto Musalem said in his first major policy speech that it could take "quarters" for the data to support a cut.
Volatility in the $27 trillion Treasury market has fallen from recent highs as the views of the Fed and investors over the number of rate cuts expected this year have begun to gel.
The ICE BofA MOVE Index — a gauge of bond volatility that tracks anticipated swings in US yields based on options — is hovering at about 98, down from an April high of 121, Bloomberg reported.
Price Action: SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:BIL) remained flat before Thursday’s opening bell, while iShares 7-10 Year Treasury Bond ETF (NASDAQ:IEF) declined 0.4%; iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) fell 1% in pre-market trading on Thursday.
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