Bond Traders See Market Tilted Toward Gains Ahead of Inflation

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Jefferies International,Mohit Kumar,Treasury Auctions

(Bloomberg) -- Treasury investors see more room for gains than losses in the short term as US inflation is expected to show underlying price growth in the...

-- Treasury investors see more room for gains than losses in the short term as US inflation is expected to show underlying price growth in the economy is slowing.With Treasuries already trading at the weakest levels of the year, banks including Wells Fargo & Co. posit that a big move is more likely in response to a benign inflation reading than a hot print later Wednesday.

Positioning indicators also suggest the market is vulnerable to a so-called short squeeze. CFTC data shows funds that use borrowed money to amplify returns increased short positions in the Treasury futures market for the first time in two months. Investor interest in buying at higher yield levels may keep the 10-year Treasury rate — which peaked Monday at 4.46% — from topping 4.5% for the first time since November in the event of higher-than-expected inflation, RBC Capital Markets strategist Blake Gwinn wrote in a Tuesday report.

NEW YORK — British Columbia's credit status took a double blow on Tuesday, with S&P downgrading the province due to the risk of "outsize" deficits, and Moody's turning its outlook negative. S&P Global Ratings blamed big government spending as it dropped its credit rating for the province and BC Hydro's provincially guaranteed unsecured debt from AA status to AA-minus. It's the third rating drop since 2021, when B.C. lost AAA status.

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