Bond Selloff Is Close to Over as Fed Nears End of Hiking Cycle

The selloff in US debt appears close to being over as the Federal Reserve nears winding up its most aggressive rate hikes in a generation.

At the same time, monetary policy is poised to cede its central role in moving Treasuries to another force: The scale of the federal government’s deficit. Those are conclusions drawn from a Bloomberg Markets Live Pulse survey conducted Wednesday after the Fed’s latest meeting.

Fed is Done Hiking, Almost Half of Respondents Say

They reinforced the optimism that drove the bond market to one of its biggest one-day rallies of the year. The 10-year Treasury yield tumbled about 20 basis points to 4.73%, the biggest drop since March.

“The risk-reward in Treasuries is decent going into 2024 — especially if economic activity slows down and rate cuts materialize,” said Spencer Hakimian, the founder of Tolou Capital Management.

Almost half of the 160 respondents to the Pulse survey said that they don’t expect the Fed to raise its benchmark rate further, predicting the next move in the cycle will be an easing of policy as the economy slows.