While the losses that their economists predicted have yet to materialize, JPMorgan Chase & Co., Citigroup Inc. and the 20 other firms that trade with the Federal Reserve began wagering on a Treasuries selloff last month for the first time since 2011.
Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis.
When Ben S. Bernanke asserted last month that the Federal Reserve doesn’t ever have to sell assets, he raised questions about how the central bank can withdraw its record monetary stimulus without stoking inflation.
Just the hint the Federal Reserve would end debt purchases that have supported bond prices sent Treasury yields soaring last month to the highest since April, a reaction that is unwarranted if money markets are a guide.
Treasuries erased losses as Federal Reserve policy makers said more economic stimulus may be needed and the European Central Bank said it will suspend some operations with Greek banks due to incomplete recapitalizations.