Bond Traders Load Up on Bearish Wagers as Rate-Cut Odds Dwindle

Bond traders are piling into bearish bets, fueling a selloff in benchmark Treasury securities, as fresh evidence of robust US growth triggers a recalibration of expectations for Federal Reserve interest-rate policy.

JPMorgan Chase & Co.’s latest client survey showed that outright short positions in US Treasuries rose to the most since the start of the year in the week leading up to April 1. That bearish sentiment spilled over into this week, helping to drive US 10-year yields to as high as 4.4% on Tuesday, a level not seen since November.

Reports released in recent days showed strength in manufacturing and jobs, underpinning a narrative of US resilience that has been gaining momentum all year. The latest data, combined with signs of sticky inflation and gains in commodities such as oil, has caused investors to further scale back predictions for the timing and extent of central bank monetary easing and gird for a period of higher-for-longer rates.

The Treasury market backdrop “is being shaped by rising growth expectations,” said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment.

Treasuries Selloff Extends With Oil Gains