Treasuries poised for longest winning streak in three years

investmentnews.com:

Treasuries are poised for their longest monthly winning streak in three years as traders look past US data on personal income and expenditure due Friday and prepare for the Federal Reserve to start cutting interest rates.

US government bonds returned 1.5% in August through Thursday, set for a fourth month of gains that would be the longest run since July 2021, according to the Bloomberg US Treasury Total Return Index. The gauge has been rallying since the end of April, extending this year’s gain to almost 3%, as investors have grown more confident in the case for lower US borrowing costs. 

The bond index has bounced back from its 2.3% loss in April as signs of cooling inflation and easing job growth have given the Fed more scope to cut rates from the highest level in more than two decades. Bloomberg Economics sees Friday’s report on personal income and outlays reviving talk of a “Goldilocks” economy, and expects the Fed to cut interest rates by 50 basis points in September, followed by another jumbo reduction before year-end.

Treasury 10-year yields slipped to a 14-month low of 3.67% in early August following weaker-than-expected US payroll data, before climbing back to 3.86% on Friday. Treasuries were little changed on the day.

“The bond market is still an interesting place to be,” Tiffany Wilding, an economist at Pacific Investment Management Co., said in an interview on Bloomberg Television. “We see a lot of value despite the recent rally.”

At the Jackson Hole symposium last week, Fed Chair Jerome Powell said “the time has come for policy to adjust,” marking a turning point in the central bank’s battle against inflation. The Fed has kept the benchmark rate in the range of 5.25% to 5.5% since July 2023. 

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