US debt has finally regained some of its lost ground this year. The market is betting that the Fed will cut interest rates in the first half of next year.

The stalled market in the US bond market, the world’s largest at US$26 trillion, finally had a happy ending. It has now pulled back 3.3% of its losses, due to the surge in US debt this month.

The Bloomberg US Treasury bond index rose 0.2% on Monday and is now back to year-end 2022 levels.investPeople originally thought that 2023 would be the “Bond year”, but there have been many ups and downs. This is because the strong US economy has prompted the Federal Reserve (Fed) to expand.raise interest ratescycle.

Then, as inflation slowed and the labor market loosened, investors bet that the Fed would finish raising interest rates and cut interest rates in the first half of next year.

Andrew Ticehurst, interest rates strategist at Nomura Securities in Sydney, said: “The pace of growth has peaked, inflation has faltered and the central bank tightening cycle has ended.YieldThis is still much higher than before, and there is still room for interest rates to rise if risk-off developments occur. ,

The US Treasury market has been as volatile this year as riskier assets like stocks. Implied volatility in the US Treasury market reached its highest level since the 2008 financial crisis in March, according to the Intercontinental Exchange (ICE) MOVE index.

Bloomberg US The Treasury bond index rose 2.8% this month, its biggest gain since March. Federal funds futures show that traders who originally bet on a 40% chance of another interest rate hike in late October have now ruled out a rate hike and a rate cut in mid-2024. Are expecting.

US Treasury bonds have risen 3.1% this year through January 18, the best start to the year since at least 1988. Subsequently, strong employment and inflation data raised expectations that the Fed would raise interest rates, and US bonds pared their gains from the start of the year. The banking crisis that began in March triggered a strong rebound once again, leading to US Treasuries posting a return of 4.2% in April. Subsequently, US debt declined for six consecutive months, the longest such decline since 2011.

Even though the bond market may be mediocre this year, it will be a big relief for bond investors. US Treasury bonds have fallen 2.3% in 2021 and will see an unprecedented 12.5% ​​decline in 2022. If you are only in the US If you hold treasury bills, you will get a return of 4.5% this year.

finance(tagstotranslate)interest rate growth