NEW YORK (MarketWatch) — The bid has returned to the Treasury market Friday after yields closed higher a day ago.
Bond yields move inversely to prices.
Tom Tucci, managing director and head of Treasury trading at CIBC World Markets, said that bond investors booked profits Thursday, driving the market lower after Wednesday’s massive gains.
But that profit-taking has subsided, and Tucci expects the market to remain well-bid as European investors continue to flock to the U.S. in search of higher yields.
Selling on Thursday was most heavily concentrated in Japan, where investors unwound long positions on Treasurys and the U.S. dollar to book last-minute profits before the fiscal year ends on March 31.
“That was a tremendous gain for anyone in Asia who had been long the [Treasury] market,” Tucci said. “It was a gift, they certainly weren’t planning on it — everyone was expecting the Fed to be a little more hawkish.”
The Fed has signaled to the market that an interest-rate increase will remain on hold at least until September, which should be supportive of the market. The next test of the market’s strength will be next week’s auctions of newly issued two-, five- and seven-year notes.
“Next week, we’ll move into some supply — then we’ll see how strong the bid is in the market,” Tucci said.
This entry passed through the Full-Text RSS service – if this is your content and you’re reading it on someone else’s site, please read the FAQ at fivefilters.org/content-only/faq.php#publishers.