...

Treasury Rout Subsides as Cash Buyers Step In to Buy the Dip




  • In Business
  • 2021-09-28 20:29:13Z
  • By Bloomberg
 

(Bloomberg) -- The extended selloff in Treasuries that drove five-year yields to fresh 19-month highs on Tuesday was just too much for some investors, who jumped in and stanched the bleeding.

Most Read from Bloomberg

  • The Country That Makes Breakfast for the World Is Plagued by Fire, Frost and Drought

  • HSBC Bets Big on China as Pressure Mounts in London

  • How Los Angeles Became the City of Dingbats

  • Why the Gaza Strip May Be the City of the Future

  • The Rise of the Pandemic Dashboard

A steady flow of buyers ranged from foreign and domestic funds as well as leveraged accounts. Central bank buying was also prominent in the front-end and belly of the Treasury curve, according to traders familiar with the flow. A solid U.S. 7-year note auction helped to calm price action over the afternoon session as yields settled a few basis points below the earlier highs.

It was also an active session across Treasury futures, where volumes were around 70% above recent levels over the New York session. There was a notable uptick in volumes when 10-year yields peaked through 1.565% and then quickly reversed down to back under 1.55%, suggesting buyers at work.

A big question now is whether the yield back-up to the highest levels since 2020 will also be enough to tempt investors in Asia, typically renowned for buying into dips. This may not be the case this time around, according to Morgan Stanley strategists who note that recent gains in Japanese shares have "reduced the incentive for banks in Japan to earn income and, possibly, capital gains."

Treasuries Face Risk of Prolonged Selloff From Convexity Hedging

Meanwhile, open interest may provide clues as to whether buying over the New York session was motivated by short covering, or fresh long positions.

Most Read from Bloomberg Businessweek

  • A Tiny Piece of Plastic Is Helping Farmers Use Far Less Water

  • The Energy Future Needs Cleaner Batteries

  • Evergrande Debt Crisis Is Financial Stress Test No One Wanted

  • Microsoft and an Army of Tiny Telecoms Are Part of a Plan to Wire Rural America

  • In Amazon's Flagship Fulfillment Center, the Machines Run the Show

©2021 Bloomberg L.P.

COMMENTS

More Related News

Snap
Snap's Record Rout Leads $142 Billion Social-Media Selloff

(Bloomberg) -- Snap Inc. posted its biggest one-day drop on record after the Snapchat parent company warned that Apple Inc.'s data collection rules and...

Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut
Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut

(Bloomberg) -- Most Read from BloombergThe Top Money Maker at Deutsche Bank Reaps Billions From SingaporeWhy Americans and Britons Are Rushing to Buy Idyllic...

Tesla Shares Reach New Heights as Earnings Supercharge Rally
Tesla Shares Reach New Heights as Earnings Supercharge Rally

(Bloomberg) -- Tesla Inc. shares rallied to a record high on Friday, taking the electric-vehicle maker another step closer to joining an elite group of...

Intel
Intel's 12% Slide Erases More Than $26 Billion From Market Value

(Bloomberg) -- Intel Corp. shares plummeted to their lowest close since December on Friday, after the chipmaker reported third-quarter results and detailed a...

Bitcoin
Bitcoin's Record-Breaking Week Is Ending With a Whimper

(Bloomberg) -- Bitcoin's record-breaking week ended on a down note.Most Read from BloombergThe Top Money Maker at Deutsche Bank Reaps Billions From...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business