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Bond Investors Bullish Sentiments Are at Peak Since June 2016; U.S. Treasuries Are Shining

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Bond investors are enjoying the Fed’s interest rate policy and bullish commentary related to inflation and the future prospects for rate cuts. Fed’s chairman Jerome Powell says the fed is not in hurry to make changes in interest rate.

U.S. Treasuries are currently standing at the highest level in a week. The Treasury yield on two-year jumped close to one basis point to 2.35%. The yield on 10-year Treasuries is boosted on Thursday to 2.55%.

We think our policy stance is appropriate at the moment and we don’t see a strong case for moving in either direction,” Powell told CNBC’s Steve Liesman. “We say in our statement of longer-run goals and monetary policy strategy that the Committee would be concerned if inflation were running persistently above or below 2%.

According to J.P. Morgan survey, the bullish sentiments for owning U.S. longer-dated government debt jumped to the highest level since June 2016, supported by indicators of soft inflation despite steady economic growth.

Based on the survey results, the majority of investors said they are “long” on longer-dated Treasuries than those investors who said they are “short”.

Treasury yields are rising over the past two days as investors believe that the Fed is likely to keep the interest rate on hold for longer than expected time. Bond investors and interest rate futures traders expect a little possibility of a rate cut this year. According to the CME Group’s FedWatch Tool, the market participants are now pricing in only a 50% probability of a rate cut, which is significantly lower from 64% in the previous week.

The stock markets, on the other hand, have lost their upside momentum amid interest rate policy decision. The U.S. stock market has reported losses in the past two straight sessions. Oil and gold prices are extending the downward trend.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.