Long-Maturity Treasuries Fall After Market’s Best Year in Five

Group 1 - Long-maturity Treasuries started 2026 on a defensive note after experiencing the largest annual gain in five years, with investors focusing on potential Federal Reserve interest-rate cuts to stimulate inflation [1] - The yield on the 30-year bond increased by about two basis points to 4.87%, marking the highest level since September, while shorter-maturity yields remained stable or decreased [2] - The upward pressure on yields is attributed to a concerning long-term fiscal outlook and signs of resilience in the US economy, as indicated by strong data and rising stock prices [3] Group 2 - Market volatility is expected to increase as investors assess the direction of monetary policy, with historically high valuations for US stocks providing a compelling reason to hold bonds as a hedge [4] - There has been significant demand for interest-rate derivatives that offer protection against the Fed's target range falling to 0%, while swap contracts predict a lower bound closer to 3% by year-end [5] - Despite the resilience of the US economy and inflation exceeding the Fed's 2% target, which complicates the case for further rate cuts, the market returned over 6% last year as measured by the Bloomberg US Treasury index [6] Group 3 - Other global bond markets weakened, with those closed on Wednesday catching up with declines in Treasuries, and January is typically a busy month for new corporate bond issuance, competing for investor cash [7]