Analysis-Bruised Treasury bulls see glimmer of hope after Fed meeting, smaller issuance

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Analysis-Bruised Treasury bulls see glimmer of hope after Fed meeting, smaller issuance
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Analysis-Bruised Treasury bulls see glimmer of hope after Fed meeting, smaller issuance

© Reuters. FILE PHOTO: A cyclist passes the Federal Reserve building in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/File Photo/File Photo

Earlier in the day, the U.S. Treasury said it will slow the pace of increases in its longer-dated debt auctions in the next three months, at least temporarily assuaging concerns that investors will require higher yields to absorb an expected torrent of government debt. “Bonds are starting to show a little bit of life,” said Jack McIntyre, portfolio manager at Brandywine Global. However, if Friday’s payroll number exceeds expectations, “then that bullishness will get tested.”

Bond bulls argue investors should increase exposure to long-term securities partly because they could appreciate in price if an economic slowdown pushes the Fed to eventually cut rates. Not everyone took Powell's comments as dovish, however, and some investors cautioned the market was too quick to dismiss the possibility of more hikes.

Wilensky, who has been moving from bets on shorter-term bonds to longer-term ones, does not expect rates to rise significantly from current levels but reckons that bond market volatility will remain given the high level of geopolitical risks.

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