As government bonds record their worst week in a few years and the central bank’s interest rate hike cycle has begun, signs of problems continue to appear in the world’s largest and most liquid government securities market.
JPMorgan Chase & Co. According to the report, all six gauges used to monitor the depth of the U.S. Treasury market, the ease with which it can be bought and sold without significantly impacting the price of securities, have remained abnormal for March. .. JPM, + 0.87% Liquidity Stress Dashboard. This was the case before the widespread and aggressive sale of US Treasuries on Friday. This sent 2-TMUBMUSD02Y, 2.280% and 10-year yield TMUBMUSD10Y, 2.478% to the largest weekly profits since June 2009 and September 2019, respectively. Yields and prices move in opposite directions. Therefore, the sharp rise in yields reflects the decline in demand and prices for government bonds.
Source: JP Morgan Chase and Company
The decline in Treasury market depth has been a significant recent yield as investors take into account the Fed’s first-quarter percentage point rise since 2018 and perhaps larger moves. Corresponds to the rise of. According to Alex Rover, interest rate strategist at JP Morgan, the biggest factor behind market illiquidity is the story of the US central bank “boosting interest rates.”
“We’ve been in a low cash market for months, partly because interest rates have fallen and we’re very sensitive to the Fed and inflation news,” Roever called on Friday. I mentioned in. “That is, holding bonds is very painful, and overall, it feels like there is less demand and more end users aren’t buying government bonds than they used to be.”
JPMorgan’s dashboard captures over 20 different market gauges, most of which are in the government bond market. In total, the 10 gauges being monitored were flashing with a status of “red” or “amber” as of Thursday, before Friday’s market activity.
On Friday, two TMUBMUSD02Y, 2.280% and 10-year Treasury yields TMUBMUSD10Y, 2.478% rose to their highest levels since May 6, 2019, but five TMUBMUSD05Y, 2.543% and 30-year yields TMUBMUSD30Y. , 2.589% wobbled on the brink of reversal.