US bond bulls lean into latest selloff despite inflation scare
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A sharp selloff in U.S. bonds prompts some investors to consider allocating more funds to lock in higher yields ahead of interest rate cuts by the Federal Reserve. Treasury yields have soared in recent weeks after solid economic data and rebounding price pressures pushed out expectations of rate cuts. Despite lower bond prices, investors see an opportunity to increase duration and benefit from potential interest rate moves. Some investors are rotating from cash to high-yielding fixed income products such as mortgages, credit, and emerging markets. Year-to-date returns on Treasuries have been negative, but investors remain optimistic about the duration trade. However, not all investors share the same view, with some expecting lower yields and a drop in allocations to bonds. Traders of futures tied to the Fed's policy rates expect less than two interest rate cuts in 2024. Confidence in easing price pressures is lower compared to the previous rally in bonds. It is considered too early to extend duration.

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