(Bloomberg) — Treasuries are rising to kick off an eventful week in global bond markets, putting US debt on track for a third-straight month of gains in what would be the longest rally in three years.
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Long-dated bonds led Monday’s advance, with yields on 30-year securities falling about 5 basis points as traders prepare for the Federal Reserve’s July 31 policy decision. Treasuries have been rallying amid expectations the central bank will signal the start of an easing cycle is near.
“If you look at market pricing, we’re already there for a September cut,” Erik Nelson, a Wells Fargo macro strategist, said on Bloomberg Television. Further out, “can you get two rate cuts? Absolutely. I think the bigger question for the market is can you get six — or even more than that.”
The recent run of gains has pushed a key gauge of US debt up 1.3% this month, boosting returns since the end of April to roughly 3.9%, according to data compiled by Bloomberg. The Bloomberg Dollar Spot Index, meanwhile, has fallen about 0.8% in July.
Investors this week are waiting for a 32-hour spree of major central bank decisions — the Bank of Japan and the Fed on Wednesday and the Bank of England on Thursday — for clues to the path ahead for global borrowing costs.
In the US, swaps traders are pricing in a minimum of two quarter-point rate reductions by the end of 2024, with the first likely to come in September. Last week, former New York Fed President William Dudley called for a July rate cut, although expectations for a move that soon were offset by signs of US economic resilience.
Supply is also in the spotlight this week as the Treasury announces its quarterly debt plans on Wednesday. While the US government will most likely stick to its guidance and hold sales of longer-term securities steady, focus on the event has intensified after some Republicans accused the Biden administration of manipulating issuance tactics as part of an effort to depress yields and bolster the economy.
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