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

U.S. Consumer Confidence Fell to a Nine-Month Low in November
U.S. Consumer Confidence Fell to a Nine-Month Low in November

(Bloomberg) -- U.S. consumer confidence decreased to a nine-month low in November as accelerating inflation and a pickup in Covid-19 cases weighed on...

Junket King
Junket King's Arrest Spurs Selloff as Key Macau Market Targeted

(Bloomberg) -- The tide turned swiftly on Friday in Suncity Group's VIP rooms across casinos in Macau, where millions of dollars are bet on blackjack and...

Huobi Group Picks Singapore as Regional Headquarters
Huobi Group Picks Singapore as Regional Headquarters

The crypto exchange has already moved significant parts of its operations to Singapore.

SoftBank-Backed Snapdeal Targets $250 Million IPO in 2022
SoftBank-Backed Snapdeal Targets $250 Million IPO in 2022

(Bloomberg) -- Snapdeal, the Indian online retailer backed by SoftBank Group Corp. and Alibaba Group Holding Ltd., plans to file preliminary documents for an...

Indonesia
Indonesia's Central Bank Wants to 'Fight' Crypto With CBDC: Report

Indonesia is considering developing a central bank digital currency as one way to counter the use of cryptocurrency in the country.

Leave a Comment

Your email address will not be published.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

Cancel reply

Comments

Top News: Business