Treasuries Rally Drives Home Haven Role as Credit Worries Swirl

Core Insights - The Treasuries market experienced a significant rally, with benchmark yields dropping to their lowest levels in months due to haven buying amid concerns over regional banks' credit exposure and a government shutdown delaying key economic data [2][3][4] Group 1: Market Reactions - Investors reacted to the uncertainty by driving the two-year yield below 3.4%, the lowest since 2022, while the 10-year yield fell below 4%, marking its deepest decline since April [3][4] - The Treasuries market saw a second round of haven buying in October, following a previous rally triggered by renewed trade tensions [3] Group 2: Economic Indicators - Weakening employment conditions have led investors to anticipate a quarter-point Federal Reserve policy easing on October 29, prompting them to lock in 4% yields for 10 years as a safety measure [4][6] - The Federal Reserve's recent actions, including a quarter-point reduction in September, have influenced market expectations for future rate cuts, with another cut anticipated in December and potentially two more by mid-2026 [7] Group 3: Investment Strategies - Portfolio managers view Treasuries as an effective risk-off hedge, with expectations that rates could decline further amid ongoing credit concerns and trade jitters [5] - The 30-year Treasury has also gained traction, countering fears of global debasement due to significant borrowing needs of major economies, which has contributed to a surge in gold prices [6]