Key Takeaways
- • Hedge funds squared off long US dollar positions on Thursday as US Treasuries rallied amid a global equity selloff, according to Bloomberg.
- • The 10-year Treasury yield fell 10 basis points to 5.09% during Asian trading, its lowest level in three weeks.
- • A Bloomberg Treasury index has gained almost 0.7% in October after a 2.2% September decline; if sustained, it would be the strongest October for US government bonds since 2014.
- • The Bloomberg Dollar Spot Index fell 0.3% after reaching its highest level since May 2025 overnight, with the euro up 0.5% and the Swiss franc up 0.6%.
- • Pimco and Morgan Stanley Investment Management have turned more positive on bonds, though inflation and heavy debt issuance remain risks.
Summary
Hedge funds reduced long US dollar positions against several currencies, including the euro, on Thursday as US Treasuries rallied and investors returned to government bonds as a safe-haven asset, according to Bloomberg. The euro subsequently gained 0.5% and the Swiss franc advanced 0.6%. The Bloomberg Dollar Spot Index fell 0.3% after hitting its highest level since May 2025 overnight.
Benchmark 10-year Treasury yields fell 10 basis points to 5.09% during Asian trading, their lowest level in three weeks, while yields across other maturities declined by at least seven basis points. The rally followed a sharp selloff that had pushed US government debt yields to multi-year highs, prompting investors to reassess valuations despite persistent inflation concerns. The rally coincided with losses across global equity markets, particularly in Asia, where the MSCI Asia Pacific Index declined more than 2%, led by South Korean stocks.
The backdrop includes firmer inflation data. US consumer prices rose at their fastest pace in five months in September, according to data released Wednesday, and underlying inflation exceeded expectations. Andrew Canobi, Director of Fixed Income at Franklin Templeton, said the sharp rejection of the move higher in yields was eye-catching and that the bond selloff "might be getting a little fatigued" in the short term.
A Bloomberg index tracking Treasury returns has gained almost 0.7% in October after a 2.2% decline in September. If sustained, the advance would mark the strongest October performance for US government bonds since 2014. Pimco and Morgan Stanley Investment Management have turned more positive on bonds, although inflation and heavy government debt issuance remain risks.
Government bonds elsewhere also rallied. Australian three-year yields fell as much as 12 basis points following weaker employment data, while Japanese and New Zealand 10-year yields declined eight and five basis points, respectively. Kerry Craig, Global Market Strategist at JPMorgan Asset Management, said recent bond weakness had created opportunities for investors seeking diversification from concentrated equity exposure, noting that "Government bonds can both help to rebalance portfolios and offer a genuine way to diversify this concentration risk."
Benchmark 10-year Treasury yields fell 10 basis points to 5.09% during Asian trading, their lowest level in three weeks, while yields across other maturities declined by at least seven basis points. The rally followed a sharp selloff that had pushed US government debt yields to multi-year highs, prompting investors to reassess valuations despite persistent inflation concerns. The rally coincided with losses across global equity markets, particularly in Asia, where the MSCI Asia Pacific Index declined more than 2%, led by South Korean stocks.
The backdrop includes firmer inflation data. US consumer prices rose at their fastest pace in five months in September, according to data released Wednesday, and underlying inflation exceeded expectations. Andrew Canobi, Director of Fixed Income at Franklin Templeton, said the sharp rejection of the move higher in yields was eye-catching and that the bond selloff "might be getting a little fatigued" in the short term.
A Bloomberg index tracking Treasury returns has gained almost 0.7% in October after a 2.2% decline in September. If sustained, the advance would mark the strongest October performance for US government bonds since 2014. Pimco and Morgan Stanley Investment Management have turned more positive on bonds, although inflation and heavy government debt issuance remain risks.
Government bonds elsewhere also rallied. Australian three-year yields fell as much as 12 basis points following weaker employment data, while Japanese and New Zealand 10-year yields declined eight and five basis points, respectively. Kerry Craig, Global Market Strategist at JPMorgan Asset Management, said recent bond weakness had created opportunities for investors seeking diversification from concentrated equity exposure, noting that "Government bonds can both help to rebalance portfolios and offer a genuine way to diversify this concentration risk."
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