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Treasuries are also likely to be supported as inflation can keep slowing even if growth does remain relatively healthy. The investment bank is advising its clients buy Treasury five-year notes and 30-year inflation-linked debt.
The surprisingly resilient US economy, ballooning debt and deficits, and escalating concerns that the Federal Reserve will hold interest rates high are driving yields on the longest-dated Treasuries back to the highest levels in over a decade.
The negative return, though not the first this year, signifies that the interest income the assets throw off is more than offset by the price declines associated with rising yields.
The latest offering will get Citadel Securities closer to its long-held ambition to become a primary dealer — a designation the Federal Reserve typically bestows only to firms active across all types of Treasury securities.
The yield on 30-year securities has climbed almost 25 basis points over the past three sessions, returning it to levels last seen in mid-November when inflation was still above 7%, more than double the current rate.
Wednesday's announcement will likely also see debt managers hoist regular auction sizes for securities across the yield curve — with potential exceptions or smaller bumps for notes less in demand.
In their latest assessment of the bond market outlook, Morgan Stanley strategists are challenging the former head of the Federal Reserve Bank of New York's view that losses are likely to deepen.
The market for wagers on the outlook for central bank policy shows traders now expect the benchmark rate to peak in September, instead of July.
They are bullish on equities in Japan, Taiwan and South Korea and recommend an overweight position in developed-market government bonds, including long-dated Treasuries
The Treasury's cash balance fell to just $37.4 billion on Tuesday, according to data published Wednesday. That more that reverses the previous day's bounceback.
Traders amped up wagers on a June rate increase to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear.
The U.S. 30-year yield rose to the highest level since November, joining the rest of the Treasury market in offering a return of at least 4% after labor-market data.
The bond market faces a bigger threat than recent rate hikes: the notion that rates will stay elevated even after the U.S. central bank's inflation fight is all over.
Investors offloaded $12.6 billion of Treasuries last year, but that figure was dwarfed by a record $121.8 billion purchase of U.S. agency debt, higher-yielding securities.
The yield on the two-year Treasury moved to be as much as 32 basis points higher than the 10-year yield, which slid in the wake of the Fed’s announcement that it was raising its overnight benchmark by 75 basis points.
The evidence of the Fed’s loss of control has multiplied uncomfortably in recent weeks. For its sake and that of both the domestic and global economy, the central bank desperately needs to regain control of the inflation narrative.
It all threatens to add a fresh twist for Treasury investors, who are already grappling with haywire moves and near double-digit losses with few precedents in the modern trading era.
A consensus has formed that the Federal Reserve waited too long to start tightening money. Fed watchers are still disagreeing about another question: Is the central bank tightening too much and too fast now?
US Treasuries extended losses and stock futures remained down as investors considered how a better-than-expected US jobs report might impact the pace of Federal Reserve policy tightening.
Investors are on edge over whether the US central bank’s tighter policies will induce a recession. A chorus of Fed officials has fallen behind calls to keep hiking to counter price pressures.
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