Treasury bonds and related exchange traded funds were among the better performing areas of the markets on Monday as traders turned to safe-haven U.S. government debt.
On Monday, the Vanguard Extended Duration Treasury ETF (EDV) rose 2.0%, the SPDR Portfolio Long Term Treasury ETF (SPTL) increased 1.5%, the PIMCO 25+ Year Zero Coupon US Treasury Index ETF (ZROZ) was up 2.1%, and iShares 20+ Year Treasury Bond ETF (TLT) gained 1.6%.
Treasury yields rose as investors prepared for the upcoming inflation data and corporate earnings season, with many anxious over how the Federal Reserve will outline its monetary policy outlook ahead.
The markets are still processing a stronger-than-expected jobs report on Friday that showed the labor market is still strong, which fueled bets that the Fed could continue its aggressive interest rate hikes and potentially trigger a recession.
The next key data report will be on the U.S. consumer-price index for June due Wednesday.
“It’ll be interesting to see how the market trades following that news,” Charlie Ripley, senior investment strategist for Allianz Investment Management, told the Wall Street Journal. “It doesn’t appear like we’re going to have a decline in inflation any time soon.”
Meanwhile, investors are also waiting on the corporate earnings season to gauge how much higher prices and weaker consumer sentiment have weighed on corporate America’s profits.
“We’re in a backdrop where central banks are going to continue raising interest rates and the underlying market narrative continues to be one of potentially rising recession risks. We’re going to see markets react to different data points, react to earnings,” Laura Cooper, a macro strategist at BlackRock, told the WSJ. Cooper doesn’t advise that investors ”buy the dip” at present. “That sets us up for quite a volatile period ahead.”
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