FILE PHOTO: U.S. flags fly out in front of the New York Stock Exchange is seen in New York, U.S., February 16, 2021. REUTERS/Brendan McDermid
“The selloff may have run its course,” said Jabaz Mathai, head of U.S. rates strategy at Citi, pointing to inflation breakevens backing down. The decline in breakevens, as well as tightening swap spreads, are the strongest signals yet that U.S. Treasury yields have peaked, said Mathai. The peak in Treasury yields is also evident in narrower U.S. swap spreads, a barometer of hedging activity against rate rises.
The decline in the trading volume of put options - which increase in value when prices fall - suggests some investors believe the bearish trend is over for now, said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. Still, there is continued evidence of data showing inflation and other aspects of the economy are on the rise, bolstering the case that upward pressure on yields could persist. Manufacturing data reported Monday showed the strongest growth in three years. The data also showed that prices paid by manufacturers were the highest since July 2008.
“ knew they were going to be dovish while at the same time we were getting better news,” said Ritchie Tuazon, fixed income portfolio manager at Capital Group.
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