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The Treasury Market’s Big Recession Trade Is Gathering Momentum

  • Investors see rates lower over longer term even as Fed hikes
  • Slew of key data coming up on jobs, manufacturing, inflation
Bloomberg business news
Credit Spreads to Widen in 2023: Oaktree's Panossian

The bond market is zeroing in on a US recession next year, with traders betting that the longer-term trajectory for interest rates will be down even as the Federal Reserve is still busy raising its policy rate.

Long-dated Treasury yields are already below the Fed’s overnight benchmark range -- currently 3.75% to 4% -- and there’s still an extra percentage point of central bank increases priced in for the coming months. Activity has also emerged in the options market that suggests some are hedging against the risk that policy rates could eventually halve from their current level.