Bond investors see brighter days – Axios




U.S. government bonds could breakout further after yields on the benchmark 10-year Treasury note ticked up to their highest since early June last week.

But, but, but: Strategists say this move is about an improving outlook for economic growth rather than just inflation.

What it means: Economic growth comes with inflation but for much of the year investors have been betting the massive increase in the U.S. money supply as a result of stimulus efforts from the Fed and Congress would deliver inflation that might not include growth.

  • That led to a bonanza for gold, silver, Treasury Inflation-Protected Securities and other inflation hedges, and a decline in the dollar.
  • But those assets have reversed much of their earlier gains of late and remained tied down in tight ranges while U.S. government debt yields have surged.

What we’re hearing: There’s a clear pickup that began after the first presidential debate on Sept. 29, as investors have bet on a Joe Biden victory and blue wave Democratic takeover of Congress that could lead to substantial government spending, including an infrastructure bill. But it’s not all politics.

  • It’s about “a bounce in economic activity, writ large, expectations of a little more inflation from Fed policy and natural economic trends as well as those politically related issues,” Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, tells Axios.

The intrigue: Yields on the 10-year note are even edging above their 200-day moving average for the
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