(Bloomberg) -- Treasuries notched gains for the third straight quarter, as a pending US government shutdown threatened to slow economic growth and boosted the case to buy bonds.
US government bond prices edged higher on Tuesday, capping off a three-month span in which they have has posted a 1.5% return, according to a Bloomberg index. Treasuries have returned more than 5% through the first three quarters of the year, setting them up for the best year since 2020.
Most Read from Bloomberg
Why US Cities Pay Too Much for Transit Buses
For Lovers of Brick, Chicago Is a Wonderland
Trump Housing Agency Removes Lawyers Who Filed Whistleblower Report
After the Pandemic ‘Reset Button,’ Downtowns Reinvent Themselves
Officials face a midnight deadline to avoid a shutdown that would disrupt US government operations, delay the release of key economic data and potentially drag down economic growth. Long-dated Treasuries have rallied around previous episodes of prolonged stoppages.
Tuesday’s gains drove the 10-year yield one basis point lower to 4.13%, after it shed four basis points the previous day. The two-year yield, which stands at 3.59%, is near its lowest level over the past year.
Scott Buchta, head of fixed-income strategy for Brean Capital, said this week’s gains reflect a “small flight to quality trade.”
“More people are becoming constructive on the market amid the possibility that an extended shutdown slows the economy,” he said.
Rate Cuts
The market has rallied broadly this year on the expectation of interest-rate cuts by the Federal Reserve. Policymakers reduced the rate to a range of 4% to 4.25% at their September meeting, but signaled caution on the path forward as inflation remains persistently above the Fed’s target.
The Treasury yield curve flattened notably during the month, with the differential between five- and 30-year yields shrinking about 25 basis points, on pace for its biggest shift in more than a year.
Profit-taking on steepening trades set in anticipation of the start of Fed rate cuts was a main driver. Also, consistent with the drive to exit steepening trades, the monthly auctions of 10-, 20- and 30-year Treasuries drew strong demand.
Investors are now focused on the pace of hiring for signals on the Fed’s next move, with recent reports showing weakness in the labor market.
A report from the Bureau of Labor Statistics released Tuesday showed job openings barely rose in August, suggesting relatively steady demand for workers.
‘Crucial Juncture’
Meanwhile, non-farm payrolls are due on Friday — unless a shutdown delays that release date.
At a time when the economy is “at a crucial juncture” with regards to growth and inflation, any postponement in the collection of economic data would stoke uncertainty, according to Jack Janasiewicz, portfolio strategist at Natixis Investment Managers Solutions.
“And with that increased uncertainty, we often see a pick-up in financial market volatility,” Janasiewicz said.
Further muddying the outlook is the White House’s threat to fire federal employees rather than furlough them in the event of a shutdown, raising the possibility of legal challenges, he added.
Interest-rate swaps tied to the dates of upcoming Fed meetings suggest another quarter-point cut in October, with a reduction of the same size likely in December.
--With assistance from Alice Gledhill and Elizabeth Stanton.
(Updates prices.)
Most Read from Bloomberg Businessweek
A Crypto Billionaire’s Path From Pariah to Trump Moneyman
The Tech Fashion Darling Accused of Swindling Investors Out of $300 Million
MrBeast on His Quest to Turn YouTube Fame Into an Entertainment Empire
Why Javier Milei’s Chainsaw Suddenly Jammed
The UN Shows How Trump Is Pretty Much on His Own Now
©2025 Bloomberg L.P.
(Bloomberg) -- Treasuries notched gains for the third straight quarter, as a pending US government shutdown threatened to slow economic growth and boosted the case to buy bonds.
US government bond prices edged higher on Tuesday, capping off a three-month span in which they have has posted a 1.5% return, according to a Bloomberg index. Treasuries have returned more than 5% through the first three quarters of the year, setting them up for the best year since 2020.
Most Read from Bloomberg
Why US Cities Pay Too Much for Transit Buses
For Lovers of Brick, Chicago Is a Wonderland
Trump Housing Agency Removes Lawyers Who Filed Whistleblower Report
After the Pandemic ‘Reset Button,’ Downtowns Reinvent Themselves
Officials face a midnight deadline to avoid a shutdown that would disrupt US government operations, delay the release of key economic data and potentially drag down economic growth. Long-dated Treasuries have rallied around previous episodes of prolonged stoppages.
Tuesday’s gains drove the 10-year yield one basis point lower to 4.13%, after it shed four basis points the previous day. The two-year yield, which stands at 3.59%, is near its lowest level over the past year.
Scott Buchta, head of fixed-income strategy for Brean Capital, said this week’s gains reflect a “small flight to quality trade.”
“More people are becoming constructive on the market amid the possibility that an extended shutdown slows the economy,” he said.
Rate Cuts
The market has rallied broadly this year on the expectation of interest-rate cuts by the Federal Reserve. Policymakers reduced the rate to a range of 4% to 4.25% at their September meeting, but signaled caution on the path forward as inflation remains persistently above the Fed’s target.
The Treasury yield curve flattened notably during the month, with the differential between five- and 30-year yields shrinking about 25 basis points, on pace for its biggest shift in more than a year.
Profit-taking on steepening trades set in anticipation of the start of Fed rate cuts was a main driver. Also, consistent with the drive to exit steepening trades, the monthly auctions of 10-, 20- and 30-year Treasuries drew strong demand.
Investors are now focused on the pace of hiring for signals on the Fed’s next move, with recent reports showing weakness in the labor market.
A report from the Bureau of Labor Statistics released Tuesday showed job openings barely rose in August, suggesting relatively steady demand for workers.
‘Crucial Juncture’
Meanwhile, non-farm payrolls are due on Friday — unless a shutdown delays that release date.
At a time when the economy is “at a crucial juncture” with regards to growth and inflation, any postponement in the collection of economic data would stoke uncertainty, according to Jack Janasiewicz, portfolio strategist at Natixis Investment Managers Solutions.
“And with that increased uncertainty, we often see a pick-up in financial market volatility,” Janasiewicz said.
Further muddying the outlook is the White House’s threat to fire federal employees rather than furlough them in the event of a shutdown, raising the possibility of legal challenges, he added.
Interest-rate swaps tied to the dates of upcoming Fed meetings suggest another quarter-point cut in October, with a reduction of the same size likely in December.
--With assistance from Alice Gledhill and Elizabeth Stanton.
(Updates prices.)
Most Read from Bloomberg Businessweek
A Crypto Billionaire’s Path From Pariah to Trump Moneyman
The Tech Fashion Darling Accused of Swindling Investors Out of $300 Million
MrBeast on His Quest to Turn YouTube Fame Into an Entertainment Empire
Why Javier Milei’s Chainsaw Suddenly Jammed
The UN Shows How Trump Is Pretty Much on His Own Now
©2025 Bloomberg L.P.
At a time when the economy is “at a crucial juncture” with regards to growth and inflation, any postponement in the collection of economic data would stoke uncertainty, according to Jack Janasiewicz, portfolio strategist at Natixis Investment Managers Solutions.
“And with that increased uncertainty, we often see a pick-up in financial market volatility,” Janasiewicz said.
Further muddying the outlook is the White House’s threat to fire federal employees rather than furlough them in the event of a shutdown, raising the possibility of legal challenges, he added.
Interest-rate swaps tied to the dates of upcoming Fed meetings suggest another quarter-point cut in October, with a reduction of the same size likely in December.
--With assistance from Alice Gledhill and Elizabeth Stanton.
(Updates prices.)
Most Read from Bloomberg Businessweek
A Crypto Billionaire’s Path From Pariah to Trump Moneyman
The Tech Fashion Darling Accused of Swindling Investors Out of $300 Million
MrBeast on His Quest to Turn YouTube Fame Into an Entertainment Empire
Why Javier Milei’s Chainsaw Suddenly Jammed
The UN Shows How Trump Is Pretty Much on His Own Now
©2025 Bloomberg L.P.