HomeFinancial MarketsBond Bulls Continue Purchases Despite Fed Uncertainty

Bond Bulls Continue Purchases Despite Fed Uncertainty

Bond traders have remained resilient with their purchases despite uncertainty regarding the Federal Reserve’s next move when it comes to its interest rate hike agenda.

While bond markets fluctuated over the past year due to uncertainty over how high the central bank would push its interest rates, traders now appear to be convinced that the Fed is earning the end of its rate hikes and are therefore expecting that the Treasury yield has also likely already peaked.

“The 5-year and 10-year have been the sweet spot for us, and we’ve been buying there,” Scott Solomon, a fixed-income portfolio manager at T. Rowe Price, explained. A slowing rate of wage gains and a rise in the unemployment rate have fueled the belief that the economy is finally being guided to a slowdown.

Investors are now looking to the release of the next consumer-price index reading on June 13 for further guidance. The CPI is expected to show that inflation slowed down to 4.1%, thereby giving the federal policy the breathing space it needs to pause its interest rate hike as its policy meeting gets underway soon after.

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