iShares 1-3 Year Treasury Bond ETF (NASDAQ: SHY)

最新ニュース iShares 1-3 Year Treasury Bond ETF (NASDAQ:SHY)

iShares 1-3 Year Treasury Bond ETF

The Fund seeks to track the investment results of the ICE U.S. Treasury 1-3 Year Bond Index (the Underlying Index), which measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to one year and less than three years. As of February 29, 2024, there were 96 issues in the Underlying Index. The Underlying Index consists of publicly-issued U.S. Treasury securities that have a remaining maturity of greater than or equal to one year and less than three years and have dollar 300 million or more of outstanding face value, excluding amounts held by the Federal Reserve System. In addition, the securities in the Underlying Index must be fixed-rate and denominated in U.S. dollars. Excluded from the Underlying Index are inflation-linked securities, Treasury bills, cash management bills, any government agency debt issued with or without a government guarantee and zero-coupon issues that have been stripped from coupon-paying bonds. The Underlying Index is market value weighted, and the securities in the Underlying Index are updated on the last business day of each month.

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Fears of the end of the U.S. exceptionalism trade have triggered a rare, simultaneous selloff across stocks, Treasuries and the dollar in recent weeks, as concerns over tariffs and the politicization of the Federal Reserve under President Donald <a href="https://www.benzinga.com/topic/donald-trump">Trump continue to mount.</a>
Since Trump's self-declared "Liberation Day" on April 2, when he unveiled sweeping "reciprocal tariffs" on U.S. trading partners, the market reaction has been swift and broadly negative. U.S. government bonds, traditionally a refuge during equity volatility, have failed to provide a safe haven.
<h3 class="wp-block-heading">The Trump-Powell Tension Behind The Market Unwind</h3>
Market fragility was further exposed by Trump&#8217;s open attacks on Fed Chair Jerome Powell. 
First, he wrote last week on Truth Social, "Jerome Powell is always too late and wrong. His termination cannot come fast enough." 
Then, during a press conference with Italy's Giorgia Meloni, he pushed the issue further: "If I want him out. He&#8217;ll be out of there real fast. Believe me."
Confirmation from National Economic Council Director Kevin Hassett that the administration is "considering" removing Powell before his term ends in 2026, also added fuel to the fire.
On Monday, the Trump-Powell drama escalated again, sending shockwaves across currency markets, where central bank independence is viewed as a cornerstone of stability.
Trump posted on Truth Social, pushing for "preemptive" interest rate cuts. He wrote that with energy costs and food prices falling — sarcastically referencing Biden's "egg disaster" — inflation was virtually gone. The president warned of a slowing economy unless Powell, whom he labeled a "major loser," acted immediately.
He further accused Powell of political bias during the previous election cycle, claiming the Fed Chair only cut rates to help former President Joe Biden and later Vice President Kamala Harris win the White House.
Betting markets currently assign a 23% chance on Powell no longer serving as Fed Chair by the end of the year. 
<iframe loading="lazy" src="https://kalshi.com/external-widgets/events/LEAVEPOWELL-25/markets/LEAVEPOWELL-25-DEC31?color_scheme=light&#038;widget_size=large&#038;utm_campaign=benzinga_widget" width="552px" height="400px" style="border:0"></iframe>
<h3 class="wp-block-heading">Triple Threat: Stocks, Bonds, Dollar All Down</h3>
The market has responded decisively. Since April 2, 2025:
<ul>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has dropped more than 6%</li>
<li>The Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), tracking the dollar index, has fallen 5.8%</li>
<li>The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) has tumbled over 8%</li>
</ul>
This rare triple selloff challenges a foundational assumption: that Treasuries typically gain when risk assets fall. 
The breakdown of this historical inverse correlation has led many to wonder: Are investors abandoning Treasuries?
<h2 class="wp-block-heading">What the Official Data Shows, And What It Doesn't</h2>
The latest U.S. Treasury International Capital (TIC) data, covering February, doesn&#8217;t show large-scale foreign divestment. 
According to Goldman Sachs, foreign investors actually net purchased long-term U.S. securities in February, including Treasuries, equities and corporate bonds.
Agency securities saw some selling, but overall the data point to continued interest from global buyers—even as market volatility ramps up.
That said, February is now outdated. 
With April&#8217;s turbulence unfolding post-TIC cutoff, the latest exchange-traded fund flows could offer more immediate clues about investor behavior.
<h3 class="wp-block-heading">ETF Flows Reveal a More Nuanced Picture</h3>
According to data from ETFDB.com through April 18, there's no evidence of broad-based exodus from Treasury ETFs. 
Despite some rotation out of long-duration ETFs like TLT and Vanguard Extended Duration Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EDV#NYSE">EDV</a>), short- and mid-duration Treasury ETFs have attracted strong inflows during the month. 
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>ETF Name </th>
<th>April Flows</th>
<th>Trend Insight</th>
</tr>
</thead>
<tbody>
<tr>
<td>iShares 20+ Year Treasury Bond ETF </td>
<td>-$2.85 billion</td>
<td>Outflows have outweighed inflows since September 2024. </td>
</tr>
<tr>
<td>Vanguard Extended Duration Treasury ETF</td>
<td>-$385 million</td>
<td>Worst monthly outflow since data began in 2015</td>
</tr>
<tr>
<td>iShares U.S. Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GOVT#NYSE">GOVT</a>)</td>
<td>+$78 million</td>
<td>Modest recovery after March's $2.95 billion outflow</td>
</tr>
<tr>
<td>iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>)</td>
<td>+$1.2 billion</td>
<td></td>
</tr>
<tr>
<td>iShares 3-7 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEI#NYSE">IEI</a>)</td>
<td>+$897 million</td>
<td>Highest inflows since July 2022</td>
</tr>
<tr>
<td>iShares Short Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHV#NASDAQ">SHV</a>)</td>
<td>+$2.94 billion</td>
<td>Best month since February 2023</td>
</tr>
<tr>
<td>iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>)</td>
<td>+$230 million</td>
<td>Four straight months of inflows</td>
</tr>
<tr>
<td>Vanguard Intermediate-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGIT#NASDAQ">VGIT</a>)</td>
<td>+$770 million</td>
<td>Strongest inflows since June 2024</td>
</tr>
<tr>
<td>Vanguard Short-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>)</td>
<td>+$505 million</td>
<td>On pace for fourth straight positive month</td>
</tr>
<tr>
<td>PIMCO 25+ Year Zero Coupon U.S. Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ZROZ#NYSE">ZROZ</a>)</td>
<td>+$3.55 million</td>
<td>Minimal activity; flows remain stagnant since October 2024</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Data as of April 18, 2025</figcaption></figure>
<h3 class="wp-block-heading">What About China?</h3>
There's also speculation that major foreign holders, especially China, could be reducing exposure to U.S. government debt in retaliation for tariffs. 
Yet, Goldman Sachs analysts see little evidence of that.
They indicated the recent dislocations are "more likely related to position unwinds by levered investors than significant real money (domestic or international) selling," a view also recently expressed by <a href="https://www.benzinga.com/topic/scott-bessent">U.S. Treasury Secretary Scott Bessent</a> during a Bloomberg interview. 
As Goldman highlighted, the dollar/yuan exchange rate behavior does not support the idea of major Chinese repatriation—
if Beijing were dumping Treasuries, USD/CNY would likely face sharp downward pressure, but the opposite has happened.
<h3 class="wp-block-heading">No Sign Of A Treasury Crisis, Yet</h3>
The bottom line: while some repositioning out of longer-dated Treasuries has been repositioned, ETF flows suggest no broad investor flight from the Treasury market.
If anything, there is a tilt toward shorter maturities, likely reflecting a desire to hedge against both rate volatility and political uncertainty.
Until more recent TIC data is available in June, ETF flows remain the best window into investor sentiment and so far, they suggest the panic narrative may be premature.
Now Read: 
<ul>
<li><a href="https://www.benzinga.com/news/25/04/44886209/if-you-had-bet-on-gold-after-the-1971-nixon-shock-youd-have-beaten-the-sp-500-unless-you-did-this-one-thing">If You Had Bet On Gold After The 1971 Nixon Shock, You&#8217;d Have Beaten The S&amp;P 500 — Unless You Did This One Thing</a></li>
</ul>
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GOVT

iShares Trust Barclays 7-10 Year Treasury Bond Fund

iShares Trust Barclays 1-3 Year Treasury Bond Fund

iShares Trust Barclays 20+ Year Treasury Bond Fund

PowerShares DB US Dollar Index Bullish Fund

VGIT

VGSH

PIMCO 25+ Year Zeroupon US Treasury Index Fund

ZROZ

Are Investors Selling US Treasuries As Trump Attacks Powell? Here's What Latest ETF Flows Tell You

The market just slipped through what JPMorgan&#8217;s Jason Hunter calls a "fork in the road" — only this time, it&#8217;s more like tumbling through a black hole. Hunter says the recent U.S. trade policy surprise pushed <a href="https://www.benzinga.com/topic/s-p-500">the S&amp;P 500</a> index below a critical level near 5500, triggering what could be an accelerated pricing of recession risks.
<h1 class="wp-block-heading">Key Support Breached – Now What?</h1>
Hunter highlights that the S&amp;P 500 didn't just tiptoe past support — it gapped straight through 5500, dipped through the mid-5300s and now hovers near a major support zone in the low 5100s.
He believes a bounce is possible from here, but don't bet the house on it. "We suspect the market can stage a bear market rebound&#8230; but believe that lift will be contained and potentially short-lived unless the news flow sees a dramatic change," he warns.
Read Also: <a href="https://www.benzinga.com/markets/equities/25/04/44660697/how-to-protect-against-a-1987-style-s-p-500-crash-scenario">How to Protect Against A 1987-Style S&amp;P 500 Crash Scenario</a>
<h1 class="wp-block-heading">The Yield Curve Has Its Own Drama</h1>
In the bond world, the 2-year Treasury note flirted with resistance at 3.48%-3.55% before backing off. Hunter now sees a ceiling at 3.825%-3.85%, but expects an eventual bullish breakout — translation: yields may start rising again soon.
<h1 class="wp-block-heading">How To Play It</h1>
For those looking to trade this technical twist, ETFs like the SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), which tracks the S&amp;P 500, or the ProShares UltraShort S&amp;P500 (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SDS#NYSE">SDS</a>), leveraged inverse ETF for the S&amp;P 500, offer exposure. If you're watching yields, the iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>), a 1–3 Year Treasury ETF, or the iShares 3-7 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEI#NASDAQ">IEI</a>), a 3–7 Year Treasury ETF, could be in focus.
The bottom line? 
The S&amp;P 500 just slipped past a critical technical threshold, and while a short bounce may lure some in, Hunter's charts are flashing caution. Don&#8217;t mistake this for a reset — it&#8217;s more likely the eye of the storm.
Read Next: 
<ul>
<li><a href="https://www.benzinga.com/news/econ-s/25/04/44669291/sp-500-officially-sinks-into-bear-market-heres-what-investors-need-to-know">S&amp;P 500 Officially Sinks Into Bear Market: Here&#8217;s What Investors Need To Know</a></li>
</ul>
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S&P 500 Slips Through The Cracks, Analyst Spots Short-Lived Bounce Before Gravity Kicks In

A bond trader has just placed a record-breaking single bet by going long on December 2024 <a href="https://www.benzinga.com/topic/interest-rates">short-term interest rate futures. </a>
This strategy will pay off if the Federal Reserve cuts interest rates at least three times by the end of the year, a scenario that is not yet fully priced into the market following recent robust economic data and higher-than-expected inflation figures.
The Secured Overnight Financing Rate (SOFR) futures — the tool used to assess market wagers on Fed interest rates — suggest that traders are anticipating a total of 68 basis points in rate cuts by the end of the year.
What Happened: A significant transaction involving 75,000 December 2024 SOFR futures contracts through a block trade occurred shortly after 9 a.m. New York time on Tuesday, <a href="https://www.bloomberg.com/news/articles/2024-04-09/bond-trader-places-record-futures-bet-on-eve-of-inflation-data?srnd=homepage-americas&amp;sref=TBDibEcD">according</a> to Bloomberg. 
The CME Group verified this as the most substantial transaction for this product ever recorded, the report said. Block trades are substantial, privately negotiated transactions conducted at a single price.
The block trade for the December 2024 SOFR futures was executed at 95.320. 
<h2 class="wp-block-heading">Chart: Bond Whale Bets Big On Fed Rate Cuts </h2>
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1024x495.png" alt="" class="wp-image-284602" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/09161856/image-27.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Why It Matters: The value of these futures could significantly increase if the March consumer price index data due Wednesday morning indicates lower-than-anticipated inflation. 
Such an outcome could lead to renewed expectations that the Federal Reserve will enact at least three rate cuts this year. 
Additionally, the trade might have been executed to close out a short position, thereby minimizing risk in anticipation of the upcoming data release.
On the other hand, if the inflation figures are higher than expected, the possibility of witnessing higher-for-longer interest rates increases, which would further reduce market expectations for Fed rate cuts. Under such circumstances, the value of the December 2024 SOFR futures would decline.
Market Reactions: Treasury yields slightly fell Tuesday ahead of Wednesday&#8217;s inflation report. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) inched 0.1% higher, the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) rose 0.4% and the iShares 20+ Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) rallied 0.9%. 
Read now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38169708/traders-brace-for-inflation-data-june-rate-cut-hopes-hang-by-thread-10-etfs-that-co">Traders Brace For Inflation Data, June Rate Cut Hopes Hang By Thread: 10 ETFs That Could Be Volatile Wednesday</a>
Federal Reserve illustration created using artificial intelligence via MidJourney.

Bond Trader Places Largest-Ever Bet On Fed Rate Cuts In 2024 Ahead Of March Inflation Report

As financial institutions continue to raise their certificate of deposit (CD) rates, American savers find themselves presented with increasingly attractive opportunities <a href="https://www.benzinga.com/money/best-1-year-cd-rates">to grow their money.</a>
These developments have been spurred by multiple Federal Reserve rate increases since March 2022, which have had a cascading effect on interest rates across the financial sector.
According to Bankrate&#8217;s data, the average 1-year annual percentage yield (APY) on CDs offered by their institution partners has reached an impressive 5.27%. 
This figure is particularly noteworthy because it surpasses the yield on 2-year Treasury bonds by more than half a percentage point. This indicates that consumers are finding more lucrative opportunities in CDs compared to government bonds or short-term bond ETFs, such as iShares 1-3 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NYSE">SHY</a>), which are traditionally considered low-risk investments.
<h2 class="wp-block-heading">Today&#8217;s Best CD Rates on the Market </h2>
Here is a list of 10 options that are currently offering the most attractive APY, as per Bankrate&#8217;s data:
<ol>
<li>Barclays Online CD: Offering no minimum deposit, Barclays presents a 1-year APY of 5.50%, with its 3-year and 5-year terms both yielding 4.50% APY​<a href="https://www.nerdwallet.com/best/banking/cd-rates#:~:text=Barclays%20Online%20CD%0A%0A,is%20accurate%20as%20of%2010%2F12%2F2023" target="_blank" rel="noreferrer noopener"></a>​. </li>
<li>LendingClub CD: Requires a $2,500 minimum deposit. It provides a 1-year APY of 5.55%, 3-year APY at 4.30%, and a 5-year APY of 4.00%​. </li>
<li>Alliant Credit Union Certificate: With a $1,000 minimum, the rates are 5.25% for 1 year, 4.45% for 3 years, and 4.35% for 5 years. </li>
<li>BMO Alto Certificate of Deposit: This option stands out with a 1-year APY of 5.65%, 3-year APY at 5.10%, and 5-year APY at a robust 5.25%, all with no minimum deposit requirement​. </li>
<li>Popular Direct CD: Demands a higher $10,000 minimum deposit but offers the highest 1-year APY at 5.67%, with 3-year and 5-year terms at 5.00% and 4.70%, respectively​. </li>
<li>Bread Savings CD: A minimum of $1,500 is needed here, yielding 5.60% for 1 year, 4.95% for 3 years, and 4.75% for 5 years​. </li>
<li>Quontic Bank CD: Requires a $500 minimum balance, offering 5.30% for 1 year, 4.40% for 3 years, and 4.30% for 5 years​. </li>
<li>Marcus by Goldman Sachs High-Yield CD: This option requires a $500 minimum deposit, with a 5.30% APY for 1 year, 4.40% for 3 years, and 4.10% for 5 years​. </li>
<li>TAB Bank CD: With a $1,000 minimum deposit, it provides a 5.27% APY for 1 year, 4.25% for 3 years, and 4.00% for 5 years​. </li>
<li>PenFed Credit Union Money Market Certificate: A $1,000 minimum deposit is needed, offering 5.25% for 1 year, 4.30% for 3 years, and 4.00% for 5 years​.</li>
</ol>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>CD Provider</th>
<th>Min. Deposit</th>
<th>1-Year APY</th>
<th>3-Year APY</th>
<th>5-Year APY</th>
<th>1-Year Earnings</th>
</tr>
</thead>
<tbody>
<tr>
<td>Barclays Online CD</td>
<td>$0</td>
<td>5.50%</td>
<td>4.50%</td>
<td>4.50%</td>
<td>$550</td>
</tr>
<tr>
<td>LendingClub CD</td>
<td>$2,500</td>
<td>5.55%</td>
<td>4.30%</td>
<td>4.00%</td>
<td>$555</td>
</tr>
<tr>
<td>Alliant Credit Union Certificate</td>
<td>$1,000</td>
<td>5.25%</td>
<td>4.45%</td>
<td>4.35%</td>
<td>$525</td>
</tr>
<tr>
<td>BMO Alto Certificate of Deposit</td>
<td>$0</td>
<td>5.65%</td>
<td>5.10%</td>
<td>5.25%</td>
<td>$565</td>
</tr>
<tr>
<td>Popular Direct CD</td>
<td>$10,000</td>
<td>5.67%</td>
<td>5.00%</td>
<td>4.70%</td>
<td>$567</td>
</tr>
<tr>
<td>Bread Savings CD</td>
<td>$1,500</td>
<td>5.60%</td>
<td>4.95%</td>
<td>4.75%</td>
<td>$560</td>
</tr>
<tr>
<td>Quontic Bank CD</td>
<td>$500</td>
<td>5.30%</td>
<td>4.40%</td>
<td>4.30%</td>
<td>$530</td>
</tr>
<tr>
<td>Marcus by Goldman Sachs High-Yield CD</td>
<td>$500</td>
<td>5.30%</td>
<td>4.40%</td>
<td>4.10%</td>
<td>$530</td>
</tr>
<tr>
<td>TAB Bank CD</td>
<td>$1,000</td>
<td>5.27%</td>
<td>4.25%</td>
<td>4.00%</td>
<td>$527</td>
</tr>
<tr>
<td>PenFed Credit Union Money Market Certificate</td>
<td>$1,000</td>
<td>5.25%</td>
<td>4.30%</td>
<td>4.00%</td>
<td>$525</td>
</tr>
</tbody>
</table>
</figure>
Read Now: <a href="https://www.benzinga.com/money/best-cd-rates">What You All Need To Know About CDs</a>

Federal Reserve

Personal Finance

10 High-Yield CDs With APYs Above 5% Offer Savers Superior Returns Over Treasuries

October jobs report numbers missed expectations Friday, and came in at nearly half of September's <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35589503/labor-market-shows-signs-of-softening-october-payrolls-decline-to-150-000-below-e">reported figures</a>. 
Non-farm payrolls increased by 150,000 jobs in October, registering a steep decline from September's 297,000 jobs. The figure fell short of market forecasts, which stood at 180,000. One key reason for the deceleration is likely the <a href="https://www.benzinga.com/topic/uaw">United Auto Workers strikes</a>, which resulted in a net loss of jobs for the manufacturing sector.
<h2 class="wp-block-heading">Market Reaction To The US Jobs Report</h2>
Treasury yields tumbled across the board. The yield on the two-year Treasury fell to 4.87%, a decrease of more than 10 basis points, while the 10-year Treasury yields fell by 11 basis points to 4.56%. The benchmark Treasury yield has declined this week from recent highs, when it occasionally traded above the 5% threshold.
The dip in yields led to gains in exchange-traded funds invested in T-bonds. At the time of writing, these ETFs were recording the following price action Friday: 
<ul>
<li>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was up 1.59%.</li>
<li>Vanguard Long-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NASDAQ">VGLT</a>) gained 1.58%.</li>
<li>iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) gained 1.03%.</li>
<li>SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) was up 0.02%.</li>
<li>iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) was up 0.19%.</li>
</ul>
Also Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35570015/october-jobs-report-expected-to-show-dip-heres-how-markets-may-react">October Jobs Report Expected To Show Dip — Here&#8217;s How Markets May React</a>
<h2 class="wp-block-heading">5 Economists React To NFPs Report</h2>
Joseph Brusuelas, chief economist at RSM US LLP, said the moderation in the pace of hiring points towards a cooler pace of growth and inflation. This could actually be needed by the American economy, which has been hiring and expanding at a torrid pace in recent months, he said. 
Lawrence Yun, chief economist at NAR, sees the Federal Reserve pivoting from raising interest rates to the neutral stance it has now to eventually cutting interest rates next year. &#8220;Be ready for more home buyers and more home sellers,&#8221; he said. 
Oliver Rust, head of product at Truflation, said the unemployment figures suggest the effect of monetary policy tightening is not feeding through to the labor market in a meaningful way. As such, he warns that an interest rate hike in December may be back on the table.
Brad McMillan, CIO for Commonwealth Financial Network, said the job report will help keep the Fed on the sidelines going forward. Since the dip in job numbers was anticipated, McMillan said the actual numbers — adjusted for the UAW strike — are probably better than the report ,indicating that despite the slowdown, job growth remains healthy overall.
Chris Zaccarelli, CIO for Independent Advisor Alliance, said the jobs report is one to trigger a &#8220;risk-on rally&#8221; into year-end. &#8220;Given that jobs growth is slowing and the unemployment rate is ticking up slightly, that is the kind of data that will keep the Fed on hold and both stock and bond prices should move higher (bond yields lower) in the absence of a more aggressive Fed, &#8221; he said. 
&#8220;The market climbs a wall of worry and we may see many more gains — in the form of a short squeeze and FOMO — before the next bear market begins,&#8221; he said. 
Read Next: <a href="https://www.benzinga.com/economics/macro-economic-events/23/10/35272828/economists-see-recession-risk-waning-end-of-fed-rate-hikes-how-could-treasury-etf">Economists See Recession Risk Waning, End Of Fed Rate Hikes: How Could Treasury ETFs React To Yields?</a>
Photo via Shutterstock.

Analyst Color

Sector ETFs

VGLT

Much-Needed Cooling Off Or Risk-On Rally Ahead? Yields Tumble, Bonds Gain After October Jobs Report

Treasury yields continue to surge, defying expectations and causing further strain in the U.S. core bond market. On Tuesday, yields on the 2-year Treasury note reached 5.2%, marking its highest level <a href="https://www.benzinga.com/topic/economics">in over 17 years.</a>
The last time short-term Treasury security yields were this elevated was back in June 2006 when the federal funds rate was holding steady at around 5% to 5.25%.
This upward movement in yields followed the unexpectedly <a href="https://www.benzinga.com/economics/macro-economic-events/23/10/35286199/september-retail-sales-top-expectations-as-consumers-defy-high-inflation-interest">robust retail sales figures</a> in September, published earlier today, which underscored the continued strength of consumer demand in the country. This, in turn, dispelled any concerns within the Federal Reserve about an economic slowdown.
Additionally, inflation has proven to be slightly stronger than anticipated in the past month, with the Consumer Price Index (CPI) showing an annual increase of 3.7%, surpassing the <a href="https://www.benzinga.com/news/econ-s/23/10/35218470/cpi-surpasses-estimates-inflation-prints-3-7-in-september-reigniting-fed-rate-hike-speculations">earlier forecast of 3.6%.</a>
While market sentiment suggested the Federal Reserve is unlikely to raise interest rates further, with a 91% probability of rates remaining unchanged at the Nov. 1 FOMC meeting according to CME Group Inc.&#8217;s Fed Watch, the persistent resilience of the U.S. economy is fostering the possibility of a prolonged period of elevated interest rates.
In its September 2023 meeting, the Fed maintained the target range for the federal funds rate at a 22-year high of 5.25% to 5.5%, and the latest FOMC minutes indicate a majority of participants leaning toward another rate hike before the year&#8217;s end.
<h2 class="wp-block-heading">Chart: 2-Year Treasury Yields Surge Past 5.2%, Highest Since June 2006</h2>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="509" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d-1024x509.png" alt="" class="wp-image-125752" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d-1024x509.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d-300x149.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d-768x382.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d-1536x764.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/10/17123258/US02Y_2023-10-17_17-32-36_6847d.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">US Treasuries Are Losing Their Strategic Footing, El-Erian Says</h2>
Renowned economist Mohamed El-Erian, president of Queens&#8217; College, Cambridge, and chief economic adviser at Allianz, voiced his concerns on Tuesday, asserting the &#8220;world&#8217;s most critical benchmark market is embarking on an unpredictable journey with an uncertain destination.&#8221;
In an article published in the <a href="https://www.ft.com/content/40d9f352-82ed-4e4d-a53b-5f9404613d4a">Financial Times</a>, El-Erian highlighted the evolving nature of U.S. Treasuries, suggesting that they are losing their long-term strategic stability and may even relinquish their short-term stabilizing role.
While U.S. Treasury bonds have traditionally been considered a safe haven during times of economic turmoil, they have recently shown signs of abandoning this reputation. 
The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), for instance, has shed over half of its value since March 2020 highs. 
Even short-term Treasuries, as tracked by the IShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>), and often considered as the ultimate risk-free asset, are down 7% from their 2020 peak, a substantial decline for a cash-like proxy. 
El-Erian pointed to several sources of uncertainty, including questions surrounding the appropriate level of interest rates, the delayed impacts of a concentrated series of rate hikes, the effects of a shrinking balance sheet and the absence of an effective monetary policy framework within the Federal Reserve.
According to El-Erian, there is currently a shortage of buyers in the Treasury market, as foreign investors exhibit hesitation, partly due to geopolitical factors. A substantial portion of the domestic institutional investor base, including pension funds and insurance companies, already holds significant quantities of bonds, which are experiencing substantial mark-to-market losses.
El-Erian cautioned there may be times when technical factors take precedence over fundamental considerations, resulting in price volatility that could potentially destabilize both financial markets and the broader economy.
Read Now: <a href="https://www.benzinga.com/markets/asia/23/10/35287634/israel-hamas-war-day-11-biden-heads-to-middle-east-as-gaza-humanitarian-crisis-deepens-terrorist-hos">Israel-Hamas War Day 11: Biden Heads To Middle East As Gaza Humanitarian Crisis Deepens, Terrorist Hostage Video Surfaces</a>

Specialty ETFs

Analyst Ratings

2-Year Treasury Yields Hit 17-Year Highs, Analyst Says US Bond Market 'Is Losing Its Strategic Anchor'

My firm, <a href="https://lcmcapital.com/">LCM Capital Management</a>, has always been a big proponent of buying, whenever possible for our clients, individual fixed income securities such as municipal bonds, CD&rsquo;s, Treasuries etc. Owning and managing an investment advisory firm, as my partner and I have for the last 23 years, we are constantly inundated by mutual fund companies or Exchanged Traded Fund (ETF) providers explaining the &ldquo;benefits&rdquo; to us, for our clients, in using their products. In their defense, it&rsquo;s their job and if I was in their shoes, I would do the same thing since firms such as ours have already done the heavy lifting part which is finding and retaining clients. But I&rsquo;m not one of them and I believe our clients are better off and happier because of that.
A few of the reasons we do not like these products are the fees associated with them and the fact that most of the products do not have a maturity, i.e. no set end date. &nbsp;They can use leverage or margin which adds risks and costs to you and they can buy whatever the hell the manager wants up to a certain percentage of their portfolio. Here is a question for you, have you ever read a prospectus? In reading one, you would be surprised by some of the latitude you typically have signed up to give to your fund manager.
Now mind you, you don&rsquo;t often hear the portfolio manager, product sales rep, broker or your advisor of these funds talking about these fund characteristics. My guess is, they assume you already know this but you know what they say about the word &ldquo;assume.&rdquo; Additionally, in my opinion, unlike the portfolio manager, the advisor/broker or sales rep is likely to know very little, if anything, about these products, let alone care. That in and of itself is a reason not to own these products. The sales reps/broker talks about performance and diversification and my favorite, something called duration. Duration is a measurement of a bond&#39;s interest rate risk that considers a bond&#39;s maturity, yield, coupon and call features. These many factors are calculated into one number that measures how sensitive a bond&#39;s value may be to interest rate changes. The problem with this number is, it&rsquo;s a guess by the fund manager because no one knows how people will react once their fund starts to lose money.&nbsp; In these circumstances, if everyone decides to sell as they did in 2022, your duration number goes right out the window.
I was recently looking into BlackRock&rsquo;s iShares 1-3 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/shy#NASDAQ">SHY</a>). I happened to be talking with a sales rep from another fund provider and I asked him and the portfolio manager of a fund who was on the call, why SHY, and for that matter most ETF&rsquo;s with the same maturities at that time, were yielding approximately 2% when the 1-year Treasury was yielding 3.54%? &nbsp;We were given some explanation as to why it was and that eventually the dividend/yield would catch-up and therefore I would not be any worse off.&nbsp; Even with my 35 years of industry experience, I still did not understand what they were talking about, which is yet another reason not to buy these products. &nbsp;
I decided to use SHY as a test case. I set out to prove my point of why investors should buy individual bonds versus a product. I bought one share in my Roth IRA of SHY on 9/12/22 at a price of $82.065. The 1-year Treasury that day was yielding 3.54%. One year later, my 12 monthly dividends on SHY have totaled $2.11 or 2.57% and the price of SHY was $80.89, so I&rsquo;m down 1.43% in principal. Now let&rsquo;s do the math: 2.57% dividends &ndash; 1.43% in principal loss = 1.14% gain. I just lost 2.40% (3.54% treasury yield versus 1.14% SHY gain). I would have been better off buying a 1-year Treasury bond.
Now think about this, that total does not even include the fee that I would be paying my broker/advisor (in this case it was me) so add that onto your &ldquo;loss&rdquo; and I think it&rsquo;s clear, at least to LCM Capital Management, why investors should avoid bond mutual funds and bond ETF&rsquo;s whenever possible.&nbsp;
So where did all that money go? It&rsquo;s a massive fund with over $25 billion in assets and my dividend yield alone is almost 1% less. 1% multiplied by $25 billion is a lot of money. If I called BlackRock and asked to speak to the portfolio manager, assuming of course he/she or CEO Larry Fink is reachable on their private plane, I bet I would not understand their answer to this question either.&nbsp;
There is a better way to invest! &nbsp;

Markets

Why Investors Should Only Buy Individual Fixed Income Securities

On CNBC&rsquo;s &quot;<a href="https://www.cnbc.com/video/2023/09/26/final-trades-ibm-utilities-more.html">Halftime Report Final Trades</a>,&quot; Liz Young of BNY Mellon Investment Management named Utilities Select Sector SPDR Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlu#NYSE">XLU</a>) <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/09/34904604/top-4-materials-stocks-which-could-rescue-your-portfolio-this-month"> as her final trade.</a>
Stephanie Link of Hightower said&nbsp;International Business Machines Corporation (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ibm#NYSE">IBM</a>) has a good yield. The company&rsquo;s stock is up just 2% year-to-date, but is up 25% from its recent lows. &quot;I like the software and consulting mix, which is 75% of the total revenue,&quot; she added.
RBC Capital analyst Amit Daryanani initiated coverage on IBM with an Outperform rating and announced a price target of $188. The Armonk, New York-based company recently reported second-quarter earnings of $2.18 per share, ahead of the $2.01 Street estimate, on revenues of $15.47 billion, which missed the $15.57 billion consensus estimate.
Don&rsquo;t forget to check out our <a href="https://www.benzinga.com/premarket/"> premarket coverage here </a> 
Josh&nbsp;Brown of Ritholtz Wealth Management picked iShares 1-3 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/shy#NASDAQ">SHY</a>).
Price Action: IBM shares were down 0.3% to $142.68 at the time of publication Wednesday.
Check This Out: <a href="https://www.benzinga.com/news/23/09/34903447/slb-splunk-and-2-other-stocks-insiders-are-selling"> SLB, Splunk And 2 Other Stocks Insiders Are Selling </a>
Photo: Shutterstock

Long Ideas

News

Media

IBM, Utilities And This Treasury ETF: CNBC's 'Final Trades'

With the Fed funds rate at 5.5%, its highest level since the early 2000s, the temptation of cash-like investments has never been more appealing, pushing investors to reconsider riskier <a href="https://www.benzinga.com/money/best-bond-etf">assets such as stocks.</a>
While the Fed may opt to press the hold button this month, the end of rate hikes has not been yet declared. Indeed, the possibility that interest rates could remain high for far longer than many predicted only a few months ago appears to be becoming more realistic.
The resilience of the U.S. economy in recent times has left many economists and analysts scratching their heads, prompting them to adjust their growth projections. 
This, in turn, has made the prospect of a looming recession seem even more remote. Consequently, we&#8217;ve witnessed a spike in U.S. Treasury yields, with the 2-year yield recently breaking the 5% barrier once more.
Read Also: <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34276055/fed-scrambles-to-revise-2023-projections-as-us-economy-surges-beyond-expectations">Fed Scrambles To Revise 2023 Projections As US Economy Surges Beyond Expectations</a>
Chart: 2-Year Treasury Yield &amp; Fed Funds Rate
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="528" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf-1024x528.png" alt="" class="wp-image-102390" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf-1024x528.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf-300x155.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf-768x396.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf-1536x792.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/07092336/US02Y_2023-09-07_15-23-22_6cecf.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Investors Flock To Short-Term Bond ETFs</h2>
The allure of cash-like investment options, now offering high returns, has gripped the attention of investors. 
<a href="https://www.benzinga.com/markets/bonds/23/08/34157617/investors-bet-7b-on-ultra-short-term-bond-etfs-chase-5-returns-amid-market-volatility">August saw an astonishing $7 billion flow into ultra-short bond ETFs</a>, marking a stark turnaround from the capital flight observed in the preceding four months. 
And as we step into the first week of September, the trend of cash-like ETFs attracting substantial investments remains steadfast.
Here are five short-term Bond ETFs that not only allow you to capture returns but also act as a protective shield against potential downturns in the stock market.
<ol>
<li>iShares 0-3 Month Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SGOV#NYSE">SGOV</a>) &#8211; Description: This ETF zeroes in on ultra-short-term U.S. Treasury bills, delivering an ultra-low-risk haven for stability-seeking investors. &#8211; Asset Under Management (AUM): $14.2 billion &#8211; Performance year-to-date: 0.2% as of Sept.7, 2023 &#8211; 1-month flows: $1.9 billion &#8211; 1-week flows: $220 million </li>
<li>Goldman Sachs Access Treasury 0-1 Year ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GBIL#NYSE">GBIL</a>) &#8211; Description: This ETF tracks U.S. Treasury securities with maturities of 0 to 1 year, presenting a short-term, low-risk investment avenue. &#8211; AUM: $5.99 billion &#8211; Performance year-to-date: 0.1% as of Sept. 7, 2023 &#8211; 1-month flows: $573 million &#8211; 1-week flows: $38 million </li>
<li>SPDR Portfolio Short Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPTS#NYSE">SPTS</a>) &#8211; Description: This ETF offers investors a portfolio of short-term U.S. Treasury securities, combining a low-risk profile with shorter durations. &#8211; AUM: $5.54 billion &#8211; Performance year-to-date: -0.69% as of Sept. 7, 2023 &#8211; 1-month flows: $64 million &#8211; 1-week flows: $127 million </li>
<li>iShares 1-3 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NYSE">SHY</a>) &#8211; Description: This ETF provides exposure to U.S. Treasury securities with maturities spanning 1 to 3 years, offering a conservative option with slightly longer durations. &#8211; AUM: $26 billion &#8211; Performance year-to-date: -0.4% as of Sept. 7, 2023 &#8211; 1-month flows: $276 million &#8211; 1-week flows: $154 million </li>
<li>iShares 1-5 Year Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IGSB#NYSE">IGSB</a>) &#8211; Description: This ETF grants investors access to a diversified portfolio of investment-grade corporate bonds spanning 1 to 5 years, striking a balance between corporate credit risk and relatively shorter durations. &#8211; AUM: $22.4 billion &#8211; Performance year-to-date: 0.2% as of Sept. 7, 2023 &#8211; 1-month flows: -$1.1 billion &#8211; 1-week flows: -$486 million</li>
</ol>

Now Read: <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34247390/why-is-the-us-dollar-on-fire-despite-feds-steady-interest-rate-signals">Why Is The US Dollar On Fire Despite Fed&#8217;s Steady Interest Rate Signals?</a>

GBIL

IGSB

SGOV

SPTS

UTWO

Cash Is King: 5 Bond ETFs Unlocking Attractive Returns In A 5% Rate World

The U.S. economy has emerged as the year&#8217;s unexpected star performer, with Federal Reserve officials poised to double their 2023 growth projections due to a <a href="https://www.benzinga.com/topic/macro-economic-events">series of positive indicators. </a>
From consumer spending to residential investment, data has consistently outperformed expectations, prompting economists to revise their forecasts. 
The unofficial estimate from the Atlanta Fed even suggests a remarkable 5.6% annualized expansion in Q3. This dramatic turnaround from just three months ago, when recession fears loomed, could force the Fed to rethink its 2024 interest-rate cut projections, according to <a href="https://www.bloomberg.com/news/articles/2023-09-06/us-economic-data-strength-has-fed-set-to-double-growth-outlook?srnd=premium&amp;sref=TBDibEcD">Bloomberg</a>. 
Chart: Atlanta Fed GDP Nowcast Is Expected To Hit 5.6% in Q3 2023
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="769" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/06074956/GDPNOW_2023-09-06_13-48-58_00b23-1024x769.png" alt="" class="wp-image-101628" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/06074956/GDPNOW_2023-09-06_13-48-58_00b23-1024x769.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/06074956/GDPNOW_2023-09-06_13-48-58_00b23-300x225.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/06074956/GDPNOW_2023-09-06_13-48-58_00b23-768x577.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/06074956/GDPNOW_2023-09-06_13-48-58_00b23.png 1438w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Strongest Economic Quarter Since 2021</h2>
Any GDP growth above 3.2% in the coming quarter would mark the strongest performance since 2021, when the U.S. rebounded from the pandemic&#8217;s initial shock. This contrasts starkly with China&#8217;s outlook, which has suffered downgrades amid a mounting property crisis. 
The Fed&#8217;s mid-June projections anticipated a mere 1% growth in 2023, a significant upgrade over the earlier March forecast that implied a recession, according to Bloomberg. 
The new projections, set for release after the Sept. 19-20 policy meeting, are expected to hover around 1.8% to 2%, with lower unemployment rate predictions. 
This growth surge might lead the Fed to scale back its anticipated rate cuts for next year to 75 basis points, down from the previously projected full percentage point.
Despite this optimism, the central bank has indicated that it will likely maintain its benchmark interest rate in September. The recent rate hike to 5.25% to 5.5%, the highest in 22 years, followed by reassuring inflation data, allows policymakers to proceed cautiously. 
Money markets are currently assigning a 93% chance of rates to stay unchanged in September, according to CME Group&#8217;s Fedwatch tool. 
The yield on the rate-sensitive 2-year Treasury note traded at 4.95% on Wednesday. An exchange-traded fund tracking short-term Treasuries – the iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) – is 0.4% lower in September. 
Read now: <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34254454/new-york-feds-inflation-gauge-holds-steady-at-over-2-year-low-is-the-threat-in-th">New York Fed&#8217;s Inflation Gauge Holds Steady At Over 2-Year Low: Is Threat In Rearview Mirror?</a>
<h2 class="wp-block-heading">Fed&#8217;s Summary Of Economic Projections: June 2023</h2>
<figure class="wp-block-table is-style-stripes"> 
<table class="has-fixed-layout">
<tbody>
<tr>
<td></td>
<td>2023</td>
<td>2024</td>
<td>2025</td>
</tr>
<tr>
<td>Change in real GDP</td>
<td>1.0</td>
<td>1.1</td>
<td>1.8</td>
</tr>
<tr>
<td>Unemployment rate</td>
<td>4.1</td>
<td>4.5</td>
<td>4.5</td>
</tr>
<tr>
<td>PCE inflation</td>
<td>3.2</td>
<td>2.5</td>
<td>2.1</td>
</tr>
<tr>
<td>Core PCE inflation</td>
<td>3.9</td>
<td>2.6</td>
<td>2.2</td>
</tr>
<tr>
<td>Federal funds rate</td>
<td>5.6</td>
<td>4.6</td>
<td>3.4</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Source: Federal Reserve</figcaption></figure>
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. 
Photo: Shutterstock

Fed Scrambles To Revise 2023 Projections As US Economy Surges Beyond Expectations

Financial safeguard tools are on sale these days and protecting your portfolio against sudden stock market declines, or simply speculating on them, has never been <a href="https://pro.benzinga.com/blog/beginners-guide-to-hedging/">as cheap as it is now. </a>
This insight comes from the Global Equity Derivatives Research team at Bank of America, which recently published a note analyzing the cheapness of market hedging costs.
&#8220;Since our data began in 2008, it has never cost less to protect against an S&amp;P drawdown in the next 12 months, as high rates align with low implied vol and correlation to offer a historic entry point for hedges,&#8221; analysts at Bank of America stated. 
Traditionally, there are several ways to hedge against market downturns, including investing in cash assets like short-term U.S. Treasury bonds, such as the iShares 1-3 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NYSE">SHY</a>), buying volatility (VIX), as tracked by the Proshares Trust VIX Short-Term Futures ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VIXY#NYSE">VIXY</a>), or purchasing put options on stocks and indices. Among these, the put option stands out as having the highest potential gains should the market experience a significant downturn.
Also Read: <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/07/33434767/biden-under-fire-larry-summers-warns-bidenomics-is-increasingly-dangerous-to-us-economy">Biden Under Fire: Larry Summers Warns &#8216;Bidenomics&#8217; Is &#8216;Increasingly Dangerous&#8217; To US Economy</a>
<h2 class="wp-block-heading">How Does A Put Option On The S&amp;P 500 Work?</h2>
Put options are financial derivatives that grant the holder the right, but not the duty, to sell the underlying asset (in this case, the S&amp;P 500 Index) at a predefined price (known as the strike price) on or before the expiration date. 
When an investor buys a put option on the S&amp;P 500, they are essentially taking a bearish or protective stance on the market, hoping to profit from a decline in the value of the S&amp;P 500. The buyer of the put option pays a premium to the seller (also known as the writer) for the right to have this option.
In practical terms, purchasing a put option is similar to securing insurance against a negative financial occurrence. If the unfavorable event doesn&#8217;t transpire, the investor is responsible for the option premium (expense). However, if it does happen, the investor stands to gain a significant return.
<ul>
<li>If the S&amp;P 500 falls below the option&#8217;s strike price before it expires, the put option gains value.</li>
</ul>
<ul>
<li>An investor can profitably sell the S&amp;P 500 at a higher price (the option&#8217;s strike) even if the market price is lower. </li>
<li>The difference between the option&#8217;s price and the market price, less what you paid for the option, is your potential profit. </li>
<li>If the S&amp;P 500 remains above the strike price or rises during the option&#8217;s validity period, the buyer&#8217;s maximum loss is restricted to the cost of the option.</li>
</ul>
<h2 class="wp-block-heading">Bank of America Recommends Buying Long-Term Puts On The S&amp;P 500</h2>
Bank of America emphasizes in the note that the current all-time low cost of protection is especially notable in a climate of 3-4% inflation, a real threat of recession, and high stock-market&nbsp;valuations despite still&nbsp;elevated&nbsp;interest rates.
The derivatives research team believes it is now &#8220;sensible&#8221; to purchase longer-dated S&amp;P put options.
These contracts are currently trading at prices even lower than those seen in 2017, a year marked by unprecedented stock market tranquility, including the lowest ever recorded Volatility Index (VIX).
&nbsp;&#8220;We continue to warn against rising fragility risk and favor a barbell approach to risk: participate but hedge the tails while waiting for the shock,&#8221; Bank of America wrote.
Chart: CBOE S&amp;P 500 PutWrite Index&#x2A; At All-Time Highs, VIX Nearing All-Time Lows 
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="749" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1024x749.png" alt="" class="wp-image-77223" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1024x749.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-300x219.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-768x562.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a-1536x1123.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/28111231/PUT_2023-07-28_17-11-56_8c83a.png 1690w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
&#x2A;The S&amp;P 500 PutWrite Index is a financial index that tracks the performance of an option strategy known as &#8220;put writing&#8221; on the S&amp;P 500 Index. This technique entails selling, or &#8220;writing,&#8221; S&amp;P 500 put options. When an investor sells a put option, the buyer of the put pays a premium (the option&#8217;s price).
Now Read: <a href="https://www.benzinga.com/news/large-cap/23/07/33445241/pce-report-signals-easing-inflation-economists-weigh-in-on-market-implications">PCE Report Signals Easing Inflation: Top Wall Street Economists Weigh In On Market Implications</a>
Photo: Shutterstock

Options

VIXY

Market Collapse? Never Been This Cheap To Protect Your Portfolio Using This Strategy, Experts Say

Traders appear to be backing out on the idea that the Federal Reserve will trim <a href="https://www.benzinga.com/news/23/06/32790467/imf-says-fed-may-need-to-push-interest-rates-higher-for-longer-inflation-does-remain-a-pressing-conc">rates this year</a>, as is apparent from the U.S. short-term interest-rates market, a report stated.
Options open interest, which shows the amount of risk held by traders, declined sharply across a number of strikes shown by preliminary CME data released Monday, <a href="https://www.bloomberg.com/news/articles/2023-06-26/traders-bail-on-fed-rate-cut-bets-on-powell-s-hawkish-message?utm_medium=social&amp;cmpid%3D=socialflow-twitter-economics&amp;utm_source=twitter&amp;utm_content=economics&amp;utm_campaign=socialflow-organic#xj4y7vzkg">reported</a> Bloomberg. This is a sign of capitulation following heavy pull-backs from rate-cut bets taken earlier, it said.
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The fears seem to be justified given the fact that Fed Chair Jerome Powell indicated the central bank could hike rates by another 50 basis points this year. He also reiterated the central bank's dedication to bring inflation down to the 2% goal, <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32951600/fed-is-focused-on-2-inflation-goal-despite-june-pause-in-interest-rate-hikes-powe">during his testimony</a> before the House Financial Services Committee.
Given the fact that services inflation continues to remain sticky and with the Fed reiterating its commitment to bring down inflation to its 2% target, a rate cut appears unlikely this year.
Price Action: Yield on the policy-sensitive two-year treasury notes was last trading at 4.69% — lower than the June highs of 4.81%. At the same time, swaps linked to Fed meetings are currently factoring in that the policy rate will peak after just one more 25-basis-point move, the report said. This, however, marks a stark shift from the expectations of rate cuts that were priced earlier.
The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) and the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) closed 0.07% higher on Monday, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
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Traders Unwind Fed Rate Cut Bets This Year After Powell's Hawkish Stance

A hotter-than-expected inflation reading in the United Kingdom has thrown a cold shower on hopes that the fight against <a href="https://www.benzinga.com/news/23/06/32940185/el-erian-believes-powells-message-to-markets-was-confused-and-confusing-says-feds-strategic-anchorin" target="_blank" rel="noreferrer noopener">inflation is nearing an end.</a>
In May 2023, consumer price inflation in the United Kingdom was 8.7% year-on-year, unchanged from the previous month but higher than market estimates of 8.4%. Monthly inflation increased by 0.7%, exceeding market expectations of 0.5%. 
The underlying measure of inflation, which excludes energy, food, alcohol and tobacco, also surprised to the upside, accelerating from 6.8% in April to 7.1% in May and reaching the highest level since 1992. 
Inflation in the United Kingdom peaked in October 2022 at 11.1%, but has subsequently fallen at a significantly slower pace than in the United States. After hiking rates by 25 basis points to 4.5% in May 2023, the Bank of England forecasted inflation lowering to 5.1% in Q4 2023, and meeting the 2% target by late 2024. Following the latest CPI data, the risk is that the path back to the 2% target will be further prolonged.
Chart: Rising UK Core Inflation Tells That Price Pressures Extend Beyond Energy and Food
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="683" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0-1024x683.png" alt="" class="wp-image-55462" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0-1024x683.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0-300x200.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0-768x512.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0-1536x1025.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21082253/GBCIR_2023-06-21_14-20-56_bd1b0.png 1844w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Traders Expect Stronger BoE Hikes, 2-Year Gilt Yields Jump To July 2008 Highs</h2>
In response to the unexpectedly high inflation reading, traders upped their expectations for additional interest-rate hikes by the Bank of England, and now anticipate a 50% likelihood of a half-point hike at the upcoming meeting on Thursday. The market is fully pricing in UK interest rates to rise to 6% by December 2023. 
The yield on 2-year gilts, which is seen as a barometer of market-rate expectations, has skyrocketed above the 5% mark, jumping to the highest level since July 2008.
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Chart: UK 2-Year Yields 
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="683" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1-1024x683.png" alt="" class="wp-image-55460" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1-1024x683.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1-300x200.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1-768x512.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1-1536x1025.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/06/21081939/GB02Y_2023-06-21_14-19-15_459e1.png 1844w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Fed Is Now On Alert: Powell Testifies Before The Congress</h2>
The Fed may take note of the recent reacceleration of inflation in the United Kingdom as a reminder that the war against inflation is not over yet.
Bond speculators also upped their expectations on a fresh rate hike by the Fed in July, now assigning 79% chance to this outcome, up from 62% a week ago. 
Treasury 2-year yields ticked 4 basis points higher to 4.73%, recovering more than half of the drop posted on Tuesday. The rise in short-term yields is likely to result in a negative session for the Ishares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>).
Fed Chair Jerome Powell will testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.
Read now: <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32924024/powell-to-testify-before-congress-after-fed-pause-what-the-market-is-watching-for" target="_blank" rel="noreferrer noopener">Powell To Testify Before Congress After Fed Pause: What The Market Is Watching For</a>
Photo: Shutterstock

Surging UK Inflation Signals To Fed Watchers That Battle Against Price Hikes Isn't Over: UK Bond Yields Soar To 15-Year Highs

Treasury yields rose during Wednesday Asian trading session ahead of Federal Reserve Chair Jerome Powell's <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32924024/powell-to-testify-before-congress-after-fed-pause-what-the-market-is-watching-for">testimony before Congress</a> and as U.K. inflation came in higher than expected.
Consumer Prices Index rose 8.7% from a year ago in May, <a href="https://www.bloomberg.com/news/articles/2023-06-21/uk-inflation-higher-than-expected-for-fourth-consecutive-month?leadSource=uverify%20wall">reported</a> Bloomberg citing the Office for National Statistics. Core inflation, which excludes volatile food and energy, rose unexpectedly to 7.1% from 6.8%, it said.
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Price Action: Yield on 2-year Treasuries rose as high as 4.74% compared to the lows of 4.66% seen on Tuesday, before cooling off a bit. Similarly, yield on 10-year notes rose to 3.76% against the lows of 3.7% seen the day before.
"We will not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy, while also providing targeted support with the cost of living," Chancellor of the Exchequer Jeremy Hunt said in a statement, according to the report. "We know how much high inflation hurts families and businesses across the country, and our plan to halve the rate this year is the best way we can keep costs and interest rates down."
The latest inflation figures come a day prior to the BOE's latest policy decision. Economists and investors are anticipating another 25 basis points increase in its key lending rate to 4.75%, the Bloomberg report said.
Earlier this week, bond markets across the world witnessed a decline as investors and traders began weighing-in the possibility of rate hikes continuing <a href="https://www.benzinga.com/news/23/06/32916660/fed-pause-aside-global-bond-sell-off-ahead-of-powell-testimony-put-pressure-on-treasuries-are-rate-h">for longer than expected</a>. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) gained 0.037% on Tuesday while the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) rose 0.069%.
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Treasury Yields Rise As UK Inflation Comes In Higher Than Expected, Market Awaits Powell Testimony

Ahead of Federal Reserve Chairman Jerome Powell's testimony to Congress, Allianz chief economic adviser and noted economist Mohamed El-Erian said the <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32861662/powell-hits-the-brakes-after-10-straight-interest-rate-increases-but-fed-signals-">central bank chair's message</a> to the market was ‘confused and confusing.'
‘Confused because they said three things that are internally inconsistent. On the one hand, they increased the inflation forecast. They also increased the amount of hikes that they are anticipating. But on the other hand, they did not hike. So, that was an inconsistent set of outcomes,' he <a href="https://www.youtube.com/watch?v=LsFX6Qz7y-U">told</a> CNBC.
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El-Erian also highlighted the mixed reactions in the marketplace. ‘You have those who believe that this was a committee outcome. So, it is what a committee would come out when the chair is trying to please everybody and you end up in the muddle middle. There are those who think they are signaling a high inflation target and there are those who think they are making a mistake. You saw the divergence in the performance of the equity market and the bond market because of that. So, it is confusing and confused,' he said.
The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) gained 0.037% on Tuesday while the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) rose 0.069%, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
Last week, the <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32865053/fed-pauses-interest-rates-a-short-lived-break-or-the-end-for-the-hiking-frenzy-5-">Fed announced a pause</a> in its rate hike campaign but indicated it will hike rates by another 50 basis points this year. According to the economist, the stock market does not believe the central bank is going to deliver two hikes. ‘The equity market has interpreted last week as a pause, not a skip, a pause. Because when push comes to shove, they believe that this Fed will be less hawkish than the bond market believes. That is the big difference right now in the marketplace,' he said.
Fed's Anchoring: El-Erian also stated that data tends to be fluid and never gives a very clear direction on a consistent basis. ‘So, if you are overly data dependent, and you have heard me say over and over again, it is not clear what is the strategic anchoring of this Fed. It is not clear how it sees the economy,' he stated.
El-Erian also asserted the Fed's inflation target is too low and said a new target, if formulated, should be higher. ‘We are now living in a world of supply constraints and if we were to formulate a new inflation target, it will be higher than 2% — it will be more like 3%,' he said.
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El Erian Believes Powell's Message To Markets Was 'Confused And Confusing' — Says Fed's 'Strategic Anchoring' Unclear

Andreas Steno Larsen, Founder and CEO of Steno Research, believes the banking turmoil is far from over as persistent core inflation may keep <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32861662/powell-hits-the-brakes-after-10-straight-interest-rate-increases-but-fed-signals-">monetary policy tight in coming times</a>.
"Monetary policy is likely to remain tight as long as core CPI stays elevated, and with the metric being stuck at 5% annualized, it could be an argument to why Fed will keep rates high, which is the sole reason behind the latest banking turmoil," Larsen <a href="https://twitter.com/AndreasSteno/status/1670802504047644675">explained</a> in a series of tweets.
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May Consumer Price Index (CPI) rose 4% on an annual basis, registering the lowest increase in two years. However, Core CPI, which strips out energy and food, stood at 5.3%, somewhat higher than the 5.2% <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/06/32838442/energy-driven-cpi-drop-in-may-contrasts-with-persistent-core-cpi-5-economists-specu">predicted by the Street</a>.
Apart from the fear of tight policy, the difference between money market fund rates and those offered by banks is also a cause of concern. Larsen explained that due to the way banks are run, they have no chance of competing with the rate that money market funds (MMFs) are offering. "And as long as the spreads stays wide, banks will slow-bleed. The smaller banks are likely to suffer from this, as confidence remains stronger at bigger banks," he wrote on Twitter.
Price Action: Bond markets are witnessing a decline across the world as investors and traders have begun weighing the possibilities of extended rate hikes due to persistent inflation. The yield on the 10-year U.S. treasury note rose as much as 3.82% before cooling off a bit during Tuesday&#8217;s Asian trading session. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) and the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) shed 0.14% on Friday, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
Larsen also noted that as deposits leave banks, lenders will have to sell their assets, which have suffered from unprecedented rate hikes. "This is again mainly a matter of confidence, and deposits are likely to seek towards the big banks for cover," he said.
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This Macro Expert Explains Why Banking Turmoil May Be Far From Over — 'Monetary Policy Is Likely To Remain Tight...'

Treasury yields jumped during the Asian trading session on Tuesday following a global sell-off <a href="https://www.benzinga.com/news/23/06/32867625/feds-rate-hike-pause-fails-to-dissuade-traders-from-betting-on-a-recession-heres-why">in the bond market</a>. The decline emerged in the United Kingdom. where investors and traders weighed on the possibility of extended rate hikes due to sticky inflation, <a href="https://www.bloomberg.com/news/articles/2023-06-20/treasury-yields-jump-to-extend-global-bond-slide-before-powell?srnd=markets-vp&amp;leadSource=uverify%20wall">reported</a> Bloomberg. Market participants are also awaiting Federal Reserve Chairman Jerome Powell's testimony to Congress on Wednesday.
The yield on the 10-year U.S. treasury rose as much as 3.82% before cooling off a bit. Australian yields with the same maturity rose eight basis points to their highest this year, reported Bloomberg.
Markets had priced-in expectations that central banks would respond to signs of inflation cooling by softening their policy. However, policymakers remained aggressive on concerns that <a href="https://www.benzinga.com/news/23/06/32848536/ross-gerber-says-inflation-is-dead-fed-is-done-bye-bye-and-go-away">inflation may stay above their targets for too long</a>.
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Following last Wednesday's Fed policy announcement, Powell had asserted in his speech that not a single person on the committee wrote down a rate cut this year. "Nor do I think it is at all likely to be appropriate if you think about it. Inflation has not really moved down. It has not so far reacted much to our existing rate hikes. And so we&#8217;re going to have to keep at it," the<a href="https://www.benzinga.com/news/23/06/32868455/el-erian-believes-this-one-powell-statement-changed-perception-about-wednesdays-policy-to-hawkish-it"> Fed Chair had said</a>.
Price Action: The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) and the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) shed 0.14% on Friday, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
The bond market sell-off commenced with gilts or U.K. bonds declining on Monday prior to the release of the country's inflation data on Wednesday and the Bank of England's policy decision the following day, according to the Bloomberg report.
"While there is little doubt that the #BoE will increase interest rates on Thursday, there will be lots of views on the size of the hike and the policy guidance for what follows&#8211;as standalone, and in combination. Indeed, of the four major central banks, the BoE faces one of the trickiest sets of policy challenges," Allianz chief economic adviser and noted economist Mohamed El-Erian <a href="https://twitter.com/elerianm/status/1670702845308305411">said</a> in his tweet.
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Fed Pause Aside, Global Bond Sell-Off Ahead Of Powell Testimony Put Pressure On Treasuries: Are Rate Hikes Done Finally?

Major Wall Street indices soared on Thursday as investors and traders began digesting the possibility the Federal Reserve's aggressive rate hike campaign is nearing its end. The Nasdaq Composite closed Thursday's session 1.15% higher while the S&amp;P 500 gained 1.22% to <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/06/32869159/morgan-stanleys-mike-wilson-says-profit-recession-still-underway-reiterates-3-900-y">hit their 14-month highs</a>.
Ross Gerber, President and CEO of Gerber Kawasaki Inc., believes the market has factored-in that the economy will not tip into a recession. "Rally rally as the new bull market gores more bears. Market is saying no recession and the Fed is done. The fed knows that higher rates will only kill more banks&#8230; you could see it in Powell&#8217;s face&#8230;," he <a href="https://twitter.com/GerberKawasaki/status/1669422043065106432">said</a> in his tweet.
The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) closed 1.24% higher while the Invesco QQQ Trust Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) rose 1.19%.
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Economic Data: Following the rate hike pause by the Fed, economic data released Thursday also helped lift market sentiment. The number of Americans applying for unemployment benefits increased by 262,000, in the week ending June 10, flat from a revised higher 262,000 the previous week and more than the projected 249,000, <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32873374/unemployment-claims-exceed-expectations-yet-robust-retail-sales-indicate-resilien">according to the U.S. Department of Labor</a>. This strengthened the argument against the central bank raising rates going ahead.
"The good news is that when the Fed does lower rates, this will work well to stimulate the economy. Hence the market rally, tons of capital will come back to work with lower rates," Gerber <a href="https://twitter.com/GerberKawasaki/status/1669425250109640704">said</a> in his tweet.
The expert also highlighted the yield on the two-year treasury bill, which is a policy-sensitive paper, arguing why there is a case for trimming rates. "The 2 yr at 4.63% is showing which way the Fed needs to be moving rates. ITS NOT UP!" he said in his tweet.
After hitting the highs of 4.8% earlier this week, the 2-year treasury yield fell to as low as 4.63% before settling in at 4.66% on Thursday. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) gained 0.21% on Thursday while the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) rose 0.19%, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
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Ross Gerber Explains Thursday's Rally — 'Market Is Saying No Recession…'

Morgan Stanley's top equity strategist Mike Wilson has reportedly <a href="https://www.benzinga.com/markets/equities/23/06/32708053/morgan-stanley-expects-16-drop-in-s-amp-p-500-earnings-heres-what-the-investment-bank-is-bullish">reiterated his year-end target</a> of 3,900 on the S&amp;P 500 Index while warning that a profit recession is still underway.
"Inflation is going to come down. It's not going to be good for stocks because that is where the earnings power has been coming from," said Wilson, <a href="https://www.bloomberg.com/news/articles/2023-06-14/morgan-stanley-s-mike-wilson-sees-us-profit-recession-persisting?srnd=markets-vp&amp;leadSource=uverify%20wall">according</a> to a Bloomberg report. The strategist had voiced his view prior to the release of the Fed policy on Wednesday.
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The expert and his team of strategists had said in a note earlier they expect S&amp;P earnings to drop 16% as against forecasts for a decline of just 2.4% this year from sell-side analysts who have raised their earnings expectations.
The strategist said that technology stocks that drove the recent market rally had the biggest earnings recession. 
"The presumption is that it's over," but "it's going to persist into the second half of the year," he added. "It's going to get worse before it improves next year."
Price Action: Although major Wall Street indices ended in the green following the Fed's policy announcement, bond traders seemed to be raising their bets on the probability the central bank will likely tip the U.S. economy into a recession. 
The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) shed 0.06% on Wednesday, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
Wilson is overweight cash and underweight stocks. He said that the market suffers from a very broad overvaluation but believes energy and financials are among the sectors that can be bought cheaply. 
"The question is, ‘What are earnings going to do?'" Wilson said, according to the report.
Read Next: <a href="https://www.benzinga.com/news/23/06/32868518/peter-schiff-dismisses-hawkish-fed-pause-hype-says-good-chance-feds-next-move-on-rates-will-be-a-cut">Peter Schiff Dismisses Hawkish Fed Pause Hype — Says Good Chance &#8216;Fed&#8217;s Next Move On Rates Will Be A Cut&#8217;</a>

Reiteration

Morgan Stanley's Mike Wilson Says Profit Recession Still Underway, Reiterates 3,900 Year-End Target For S&P 500

Peter Schiff, chief economist and global strategist at Euro Pacific Capital, said he doesn't believe in the hype on the Federal Reserve&#8217;s <a href="https://www.benzinga.com/economics/macro-economic-events/23/06/32861662/powell-hits-the-brakes-after-10-straight-interest-rate-increases-but-fed-signals-">hawkish pause on rates</a>.
"If the #Fed really was hawkish it wouldn&#8217;t have skipped this rate hike. There&#8217;s a good chance that the Fed&#8217;s next move on rates will be a cut, not because #inflation is lower, but because the labor market finally cracks," Schiff <a href="https://twitter.com/PeterSchiff/status/1669044698537664513">said</a> in his tweet.
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The economist's comments follow the central bank announcing a pause in its rate hike campaign after ten successive increases to tackle decades-high inflation. What did appear as a point of concern was the Fed's indication it may hike rates by another 50 basis points this year.
Another interesting fact from the policy was Fed Chairman Jerome Powell's skepticism on the matter of rate cuts which managed to raise eyebrows among market participants, <a href="https://www.benzinga.com/news/23/06/32868455/el-erian-believes-this-one-powell-statement-changed-perception-about-wednesdays-policy-to-hawkish-it">leading to a hawkish perception</a>. "&#8230;it will be appropriate to cut rates at such time as inflation is coming down really significantly and again we&#8217;re talking about a couple years out," Powell had said Wednesday.
Powell asserted in his speech that not a single person on the committee wrote down a rate cut this year. "Nor do I think it is at all likely to be appropriate if you think about it. Inflation has not really moved down. It has not so far reacted much to our existing rate hikes. And so we&#8217;re going to have to keep at it," the Fed Chair said.
On Rate Pause: Schiff believes the Fed Chair's decision to pause the rate hike does not make sense given the fact that Fed still acknowledges the upside risks to inflation. "Powell is clearly worried about the evolving financial crisis but doesn&#8217;t want to spook markets. So he&#8217;s done hiking, but doesn&#8217;t want to admit it," Schiff <a href="https://twitter.com/PeterSchiff/status/1669056873868173316">said</a> in his tweet.
Although major Wall Street indices ended in the green following the Fed's policy announcement, bond traders seemed to be raising their bets on the probability the central bank will likely tip the U.S. economy into a recession. The iShares 1-3 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SHY#NASDAQ">SHY</a>) shed 0.06% on Wednesday while the Vanguard Short-Term Treasury Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGSH#NASDAQ">VGSH</a>) lost 0.05%, <a href="https://benzinga.grsm.io/xjrx9r9ce0uu">according to Benzinga Pro</a>.
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