Bond Traders Position for Further Gains in US Treasuries Market

Bond traders are positioning themselves for continued gains in the US Treasuries market, with expectations that yields will keep retreating from recent highs. This follows confidence in a stable bond market after the initial volatility triggered by Donald Trump’s election victory.

JPMorgan Survey Indicates Rising Long Positions

The latest survey shows clients increasing their long positions in U.S. government debt to the highest level in a year. This shift follows a rally over the past two weeks, driven by strong Treasury note auction demand. Clients have moved away from a neutral stance to embrace these investments. The rally has been fueled by solid demand at recent Treasury auctions. This trend highlights growing confidence in U.S. government debt among investors.

Traders Respond to Fed Signals on Rate Cuts

Futures markets show growing anticipation that Federal Reserve rates will continue to decline. Trading volumes surged following comments by Federal Reserve Governor Christopher Waller, who expressed support for a rate cut at the Dec. 18 meeting. The swaps market is now pricing in a two-thirds chance of a quarter-point cut at that time.

Biden Urges Trump to Rethink Tariff Threats on Canada and Mexico

President Biden urges rethink tariffs called on President-elect Donald Trump to reconsider his plan to impose extensive tariffs on Canada and Mexico,

Bond Market Stabilization Amid Previous Concerns

The recent shift in sentiment reflects growing confidence in bond market stability. Previously, traders hedged against rising yields. Concerns over Trump’s tax cuts and tariffs had fueled inflation fears. However, the market has adjusted, with 10-year Treasury yields at 4.75%.

Upcoming Risk Events Could Impact Market Sentiment

The market will continue to watch upcoming risk events, including a speech by Fed Chair Jerome Powell on Wednesday and the monthly jobs report due on Friday. These events could influence market sentiment and affect positioning across the rates market.

JPMorgan Survey Findings on Long Positions

In the week ending Dec. 2, JPMorgan clients increased their long positions by 6 percentage points, reaching their highest level since November. Meanwhile, short positions remained unchanged. Hedging costs have become more balanced, with demand for downside protection against rising 10-year Treasury yields decreasing.

Bond traders expect continued gains in U.S. Treasuries, anticipating yield retreats, reflecting growing confidence after initial post-Trump volatility, according to wsj deals.