According to data from US public fund company Vanguard, the US Treasury bond market is approaching a level that could trigger a large-scale sell-off, or will push the 10-year US Treasury yield to 5%.
Zhitong Finance learned that data from US public fund company Vanguard shows that the US Treasury bond market is approaching a level that could trigger large-scale sell-off, or will push the 10-year US Treasury yield to 5%. Ales Koutny, head of international rates at Vanguard, said in an interview: “We are in a dangerous zone right now. Even a slight increase — above the 4.75% critical level — could force investors to abandon their upward bets and give way to a wave of sell-offs, which could push yields to 2007 highs.”
At the end of last year, investors bought US Treasury bonds one after another, betting that the Federal Reserve would begin a rapid easing cycle. Subsequently, as the latest data showed that the US economy continued to strengthen, the market turned to betting on bearish US Treasury bonds. Koutny, who helps manage Vanguard's $1.7 trillion active assets, said many people have been forced to sell off their assets to limit losses.
Koutny said, “We still think there are long positions left. If this doesn't solve the problem in an orderly manner, this disorderly act may eventually take us to the 5% level.”
Over the past week, after data showed that US inflation continued to be high, the market decline further intensified. The 10-year US Treasury yield jumped to nearly 4.7% on Tuesday and fell back to 4.57% on Thursday. Traders are betting that the Federal Reserve will start cutting interest rates in September. In contrast, the forecast a month ago was to start cutting interest rates in June, while the forecast at the beginning of the year was for March.
High yields are beginning to attract some opportunistic buyers, although negative sentiments remain entrenched throughout the US Treasury market. According to J.P. Morgan Chase's latest customer survey, the net ratio of investors going long on US Treasury bonds reached the highest level since March 25. Demand for new bonds is also strong. The yield on the 20-year US Treasury note auctioned on Wednesday was 4.818%, lower than the yield of 4.843% at the time of issuance.