10 Year Treasuries Trade in Tightest Range Since July on Fed Speculation

      What seems to be somewhat of a surprise recently is the fact that US treasuries are trading at their tightest ranges since July, which most believe is due to Fed speculation.  10 year US treasuries have been trading within a quarter percent point, a record low, as potential forecasted job growth failed.  This is leading to speculation that the Federal Reserve will, as a part of QE3, announce another round of bond purchases and further increase their balance sheet. Yields on the 10-year treasury note benchmarks have risen from the least in more than 2 weeks after the United States Labor department showed figures that the US has added approximately 146,000 jobs in November, causing the unemployment rate to drop to 7.7 percent.  Federal Reserve officials have expressed that they will continue to buy bonds until the job market improves greatly.  Industry leaders expect easing to continue, guaranteeing that we will “see more balance sheet operations,” expecting the Fed to continue to be “hyper active.”

      Hedge fund managers and other speculators have increased their long positions in 10-year treasury notes according to the US Commodity Futures Trading Commission according to recent data.  As expected, volatility in these treasuries dropped further this week to the smallest value in over 5 years.  Bank of America’s volatility index, the MOVE, touched just 51 basis points on Dec 3, the lowest it’s been since April 1988.  Looking at all these numbers, the obvious question that follows, especially to us students is – who cares? In all actuality, this is a great sign for the Untied States economy.  What these numbers demonstrate, and what can be seen in the market, is a sense of stability.  The volatility that has been plaguing out economy over the last year and a half is finally leveling off. Confidence in the markets, it seems, has finally been restored.

- Vivek Shah


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