Observers expect the U.S. bond market to continue to show signs of turbulence despite the recent inflation cooldown indicating that the Federal Reserve’s interest rate hikes may be coming to an end. Experts expect economic uncertainty to cause Treasuries to fluctuate as unexpected developments could press the central banks to keep rates higher for longer than markets expect.
Barclays has advised clients to sell two-year Treasury notes on the expectation that rates will remain elevated next year beyond expectations. This suggestion contrasts widespread bets that the Fed will begin instituting rate cuts in March next year.
Fed Chair Jerome Powell stated after the central bank’s June meeting that monetary policy decisions discussed in the September meeting will hinge heavily on data over the two months leading up to the gathering. While job growth and inflation data showed signs of cooling inflation, the core consumer price index rose at a 4.7% annual rate, while producer prices on Friday rose at a faster pace than expected.