Bond yields were mixed on Monday, as both JPMorgan and Morgan Stanley recommended buying 5-year notes ahead of an auction this week.
What’s happening
-
The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was 4.39%, up 1.7 basis points. Yields move in the opposite direction to prices. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
was 4.11%, down 2 basis points. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
was 4.32%, down 1.3 basis points.
What’s driving markets
This week will feature auctions of 2-, 5-
BX:TMUBMUSD05Y
and 7-year
BX:TMUBMUSD07Y
notes, as well as see data on fourth-quarter GDP and the PCE measure of inflation.
Strategists at Morgan Stanley recommended buying 5-year Treasurys. They say markets are missing signs of inflation progress, including the decline in what’s called the new tenant repeat rent index (NTTR), now at a lower level than even the global financial crisis.
“The NTRR can be a key data point to refute the inflation holdouts who think 1) inflation will be “sticky”, 2) the “last mile” of inflation will be hard, or 3) those who directly want to see more progress on rent inflation like Chicago Fed President Goolsbee,” they say.
JPMorgan also advised investors buy the 5-year note, saying they can add duration with that security.
They noted that the curve is near its steepest levels since early summer of 2022, when the Fed was transitioning to a rapid pace of tightening. They also say the technical backdrop is more favorable, as their survey of clients is back to average levels, which “could indicate relatively low conviction from our investor base given the combination of strong data and dovish Fedspeak.”
