U.S. Treasuries Brace For Impact
Daniel Sesay | Dec 01, 2015 07:34AM ET
US Treasuries continue to move higher ahead of the FED meeting, tracking their European counterparts. Draghi has promised QE into the bond market, so it makes sense for European bonds to make the daring climb into negative yield territory. Need I remind us what happen the last time the German 10-Year entered negative territory? Not all investors have gone cuckoo! Not yet at least. If the Euro bond rise continues we could end up testing negative yields once more.
While the story for Europe is quite clear, the US treasury market should not be displaying the same symptoms. The lower futures market volume suggests a price move with no substance. That always brings a disturbing feeling in my gut. The truth is that despite the raging battle in Syria, investors are relatively confident that all hell does not break loose, no matter how many jets Turkey shoots down. As the Federal reserve meeting draws ever closer, the bond markets remain on high alert.
It is Thanksgiving in the US, the market is out of action as US traders take out their frustration on Turkeys. It will be interesting to see if all hell breaks loose on the FED interest D-day for bonds, but truth be told, even a 10 basis point hike will be enough to send bonds to the floor. US T-Bond futures are at their highest price since 1978 with no volume in sight. I wonder who is buying all those futures? Bonds away!!
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