Oil prices drive up inflation risk, "wash trades" retreat in the US Treasury market
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Glonhui May 12th|Not long ago, the US Treasury market believed it had figured out the so-called “Kevin Warsh Trade”: all you needed to do was bet that once this nominee becomes Chairman of the Federal Reserve, he would push for multiple rate cuts. However, now, as Warsh is about to take on the highest position in the central bank, the market is starting to see things differently. Contrary to previous expectations of rate cuts, in this $31 trillion bond market, trades are now betting on a tighter monetary policy. This shift reflects strong US economic growth and inflation worries triggered by war. The 30-year US Treasury yield is approaching 5%, and the bets on a steepening yield curve based on previous expectations of easing have largely been reversed.
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