US Yields at 2024 Highs Lure Buyers Even as Shorts Dominate

The highest US yields since November are beginning to attract some opportunistic buyers, even as negative sentiment remains firmly entrenched throughout the Treasury bond market.

Treasuries rose on Wednesday, sending two-year yields down about 4 basis points to 4.95%, and trimming some of the recent surge in rates.

The latest client survey from JPMorgan Chase & Co. showed that investors were net long on Treasuries by the most in three weeks as of Monday. Meanwhile, in the options market, traders appeared biased toward unwinding at least some of their bearish positions, potentially locking in profits as US two-year yields surged to as high as 5%. Simmering Middle East tensions may also be providing some support for the safety of government bonds — but not enough to spark a rebound.

Treasury bonds have slumped this month as traders responded to data showing continued economic strength and stubborn inflation by drastically scaling back expectations for Federal Reserve interest-rate cuts. Fed Chair Jerome Powell added to the malaise on Tuesday by saying the strong readings will likely keep the central bank on hold for longer.

The persistent negative tone in the market can be seen in the magnitude of the buildup of bearish positions in open interest patterns across two-year Treasury futures where new positions, rather than liquidations, have been apparent in 13 of the past 14 trading sessions as yields have climbed.