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What Bond Market Investors Are Watching for This Week

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Bond markets remain upbeat

The US bond market continued to rebound as trade tensions and the limited appreciation in equity markets pushed demand for bonds higher, depressing the bond yields for a second consecutive week. Bond investors seem to be questioning the US Fed’s enthusiasm for higher rates as bond yields continued to retreat. There weren’t any major market-moving economic data releases last week, which could have led to the fall in bond yields. The spread between the US two-year and ten-year bonds narrowed to 34 basis points, which led to a further flattening of the yield curve in the previous week. The Vanguard Total Bond Market (BND) ETF, which tracks the performance of the bond markets, was up 0.05% for the week ending June 22 and closed at 79.0.

Bond market performance and speculator positions

For the week ending June 22, the ten-year (IEF) yield closed at 2.9%, depreciating by three basis points. The two-year yield (SHY) closed at 2.5%, down by one basis point, and the longer-term 30-year yield (TLT) closed at 3.0%, down by one basis point.

According to the latest commitment of traders report, released on June 22 by the Chicago Futures Trading Commission, speculator short positions on the ten-year Treasury futures increased last week. The total net bearish positions as of Tuesday, June 19, rose by 23,469 contracts from 335,994 contracts to 359,463 contracts.

The week ahead for the bond markets

There are a few economic data releases that could impact the bond market (BSV) performance this week. Data on new home sales, personal income, and consumer sentiment could paint a strong macro picture of the US, which could instigate rate hike fears and could lead to higher yields. The chances for such a spike in yields could be wiped out if trade tensions push investors towards safe havens like bonds, which could lead to downward pressure on yields.

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