Treasurys

In their latest assessment of the bond market outlook, Morgan Stanley strategists are challenging the former head of the Federal Reserve Bank of New York's view that losses are likely to deepen.

The market for wagers on the outlook for central bank policy shows traders now expect the benchmark rate to peak in September, instead of July.

They are bullish on equities in Japan, Taiwan and South Korea and recommend an overweight position in developed-market government bonds, including long-dated Treasuries

The Treasury's cash balance fell to just $37.4 billion on Tuesday, according to data published Wednesday. That more that reverses the previous day's bounceback.

Traders amped up wagers on a June rate increase to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear.

The U.S. 30-year yield rose to the highest level since November, joining the rest of the Treasury market in offering a return of at least 4% after labor-market data.

The bond market faces a bigger threat than recent rate hikes: the notion that rates will stay elevated even after the U.S. central bank's inflation fight is all over.

Investors offloaded $12.6 billion of Treasuries last year, but that figure was dwarfed by a record $121.8 billion purchase of U.S. agency debt, higher-yielding securities.

The yield on the two-year Treasury moved to be as much as 32 basis points higher than the 10-year yield, which slid in the wake of the Fed’s announcement that it was raising its overnight benchmark by 75 basis points.

The evidence of the Fed’s loss of control has multiplied uncomfortably in recent weeks. For its sake and that of both the domestic and global economy, the central bank desperately needs to regain control of the inflation narrative.