iShares 7-10 Year Treasury Bond ETF (NASDAQ: IEF)

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iShares 7-10 Year Treasury Bond ETF

The Fund seeks to track the investment results of the ICE U.S. Treasury 7-10 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 seven years and less than ten years. As of February 29, 2024, there were 12 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 seven years and less than ten years and have dollar 300 million or more of outstanding face value, excluding amounts held by the Federal Reserve System (the Fed). 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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200개 이상의 중앙은행과 외국 기관들이 뉴욕 연은에서 미국 국채를 대규모로 인출했다. 이는 미국 달러의 안정성에 대한 잠재적 우려를 시사한다. 

200개 이상 중앙은행 및 외국 기관, 뉴욕 연은에서 美국채 480억 달러 상당 인출

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More than 200 Central banks and foreign entities have withdrawn a substantial amount of U.S. Treasuries from the New York Federal Reserve, signaling potential concerns over the stability of the U.S. dollar.
What Happened: The New York Fed&#8217;s custody holdings of U.S. Treasuries and other assets have seen a significant decline. The holdings dropped by $17 billion last week and have plummeted by $48 billion since late March, coinciding with the onset of the trade tensions sparked by President Donald Trump&#8216;s tariffs, <a href="https://fortune.com/2025/06/18/central-banks-have-dumped-48-billion-in-treasuries-as-foreign-wealth-officials-divorce-the-dollar/">reported </a>Fortune
Bank of America&#8216;s managing director and U.S. rates strategist, Meghan Swiber and fellow strategist, Katie Craig, expressed significant concern over the withdrawal of foreign private investors from the Treasury securities market. Swiber and Craig commented, &#8220;This drop is unusual.&#8221;
Typically, the cash generated from the sale of U.S. debt is placed in the New York Fed&#8217;s reverse repurchase facility, where it is exchanged for Treasuries as collateral. However, that trend has recently reversed, with foreign participation in the facility declining by $15 billion since late March. This points to a notable reduction in U.S. assets held by foreigners at the Fed — roughly $63 billion in just over two months.
Swider told Fortune, "We're of the view that deficits are going to continue to climb higher in the coming years, and what we struggle with is, ‘Who is going to help support that higher level of supply?&#8221;
As per Torsten Sløk, chief economist at Apollo Global Management, foreign buyers constitute about 30% of the U.S. Treasury market, and any decrease in their participation could compel the Treasury to offer higher yields to attract buyers, affecting interest rates across the economy, reported Fortune. 
<ul class="wp-block-list">
<li>SEE ALSO: <a href="https://benzinga.com/crypto/cryptocurrency/25/06/45989307/senate-passes-genius-act-coinbases-brian-armstrong-calls-it-big-milestone-scott-bessent-says-passage-could-drive-stablecoins-into-a-3-7-trillion-market" target="_blank" rel="noreferrer noopener">Senate Passes GENIUS Act—Coinbase&#8217;s Brian Armstrong Calls It &#8216;Big Milestone,&#8217; Scott Bessent Says Passage Could Drive Stablecoins Into A $3.7 Trillion Market &#8211; Benzinga</a></li>
</ul>
Why It Matters: The recent withdrawal of U.S. Treasuries by central banks and foreign entities adds to the growing concerns about the stability of the U.S. dollar and the potential impact on the global economy. This trend has been accompanied by a&nbsp;<a href="https://www.benzinga.com/markets/treasuries/25/06/45960637/treasury-yields-near-5-after-soft-foreign-demand-a-red-flag-for-stocks">rise in Treasury yields</a>, which could signal a weakening of foreign demand for U.S. debt, further exacerbating the situation.
These developments are particularly noteworthy given the historical relationship between the U.S. dollar and Treasury yields. However, this pattern has seen a <a href="https://www.benzinga.com/markets/treasuries/25/06/45739830/us-dollar-decouples-with-10-year-treasuries-as-trade-tensions-change-long-standing-relationships-between-asset-classes">significant divergence</a> since April 2025, potentially indicating a shift in global confidence in U.S. assets.
As the U.S. dollar&#8217;s status as the world&#8217;s reserve currency and the confidence in the U.S. government&#8217;s ability to meet its financial obligations are called into question, the U.S. may face increased borrowing costs, potentially impacting various sectors of the economy.
On a year-to-date basis, iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) fell 1.05%, while iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) climbed 2.21%. 
<ul class="wp-block-list">
<li>READ MORE: <a href="https://benzinga.com/news/health-care/25/06/45954557/ozempic-patent-expires-in-canada-after-novo-nordisk-fails-to-pay-450-fee-its-the-second-largest-semaglutide-market-in-the-world-says-sandoz-ceo-richard-saynor" target="_blank" rel="noreferrer noopener">Ozempic Patent Expires In Canada After Novo Nordisk Fails To Pay $450 Fee: &#8216;It&#8217;s The Second-Largest Semaglutide Market In The World,&#8217; Says Sandoz CEO Richard Saynor (UPDATED) &#8211; Sandoz Group (OTC:SDZNY</a></li>
</ul>
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Disclaimer:&nbsp;This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Over 200 Central Banks Reportedly Dump $48 Billion In US Treasuries Amid Concerns Over Dollar's Stability: 'The Drop Is Unusual'

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

Futures traders are navigating a minefield <a href="https://www.benzinga.com/topic/tariffs">as new tariffs</a> send shockwaves across equities, commodities and Treasuries.
<h1 class="wp-block-heading">Markets Hate Surprises — Especially This Big</h1>
Jim Cagnina, senior market analyst at NinjaTrader, isn't surprised by the ripple effect. "Markets are inherently averse to uncertainty — especially at the scale we&#8217;re seeing with the new tariff regime," he said in an exclusive interview with Benzinga.
With inflation, raw material volatility and global supply chain risks rising, the market&#8217;s mood has clearly shifted to "risk-off."
The S&amp;P 500 futures are already down nearly 15% from their February peak, and Treasuries are feeling the pressure too. "U.S. Treasuries are also selling off big time with the 10 year yield tapping 4.5% in overnight trading," Cagnina noted, calling out the "48-basis-point move" seen last week, as one of the sharpest he&#8217;s seen in years.
As volatility hits the bond market, ETFs like the iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) or ProShares UltraShort 20+ Year Treasury (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TBT#NYSE">TBT</a>) may help traders express views on yields and rate moves.
Read Also: <a href="https://www.benzinga.com/25/04/44782555/10-year-treasury-yields-touch-45-amid-growing-tariff-uncertainty">Treasury Yields Hit 3-Year Record Surge Amid Trump Tariff Fears: What Investors Should Know</a>
<h1 class="wp-block-heading">Crude, Diesel, Metals Are Suddenly Hot</h1>
While some investors retreat, others are leaning in. Cagnina sees an upside in chaos — particularly in energy and metals.
"This environment is creating real opportunities in the energy space — particularly in Crude Oil, Ultra Low Sulfur Diesel and Gasoline futures," he said. Traders looking to ride the tariff-driven momentum in energy could consider the United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>) or Energy Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>), which offer targeted access to oil and broad energy equities, respectively.
Precious metals are also coming alive. "The bullish case for silver is strong and gaining momentum," he added, pointing to persistent supply deficits. Gold, meanwhile, is "finally acting like the risk-off safe haven many investors have been waiting for."
With Cagnina bullish on silver and gold, ETFs like the iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>) and SPDR Gold Shares (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) offer a liquid way to gain exposure without diving into futures directly.
<h1 class="wp-block-heading">Where's The Bottom? Watch These Numbers</h1>
For those brave enough to dip into equities, the magic number is 5000 for S&amp;P 500 futures. "The 5000 level has become a key level – sticky, yet still highly reactive," Cagnina explained. 
If it holds and daily price ranges tighten, that could suggest a bottom is in. Even stronger confirmation would come from a close above 5330, a key Fibonacci level that could flip sentiment from bearish to bullish, noted Cagnina.
For those eyeing a rebound in equities, the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) remains the benchmark bet, while Invesco S&amp;P 500 Pure Value ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RPV#NYSE">RPV</a>) could appeal to bargain hunters anticipating a turnaround.
<h1 class="wp-block-heading">Every Day Is An Adventure</h1>
To time the turn, Cagnina recommends keeping an eye on the 8-period Exponential Moving Average near 5300. A close above it would be his green light to shift bullish. 
Until then? "Every day is an adventure,&#8221; he said.
Read Next: 
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<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/25/04/44787818/sp-500-could-tank-to-4000-if-trump-put-fizzles-says-jpmorgan">S&amp;P 500 Could Tank To 4,000 If &#8216;Trump Put&#8217; Fizzles, Says JPMorgan</a></li>
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EXCLUSIVE: Tariff Uncertainty Turns Traders Cautious — But Oil, Silver Might Be The Escape Hatch, Says Market Analyst

When stock market volatility erupts — as it has during global trade tensions, changing Fed policy, and fresh inflationary pressures — the bond market is meant to act as a financial lifeboat. And <a href="https://www.benzinga.com/markets/bonds">recently, it ha</a>s. 
The biggest <a href="https://www.benzinga.com/etfs">Treasury bond ETFs</a>, such as the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), retained their footing and moved higher, reminding investors why bonds remain a cornerstone of portfolio stability.
Also Read: <a href="https://www.benzinga.com/etfs/specialty-etfs/25/04/44772011/gold-miners-go-parabolic-gdx-hits-2012-highs-newmont-soars-9">Gold Miners Go Parabolic: GDX Hits 2012 Highs, Newmont Soars 9%</a>
But it&#8217;s not only old-school buy-and-hold passive strategies that are in favor. Investors increasingly gravitate toward actively managed bond ETFs, wagering that clever managers can ride the rate rollercoaster more effectively than a fixed index.
While active stock pickers again struggled, active bond managers quietly won, writes a <a href="https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2024.pdf">report </a>by S&amp;P Global&#8217;s SPIVA Scorecard. It discovered that most active bond funds beat their indexed counterparts in 11 of 16 fixed-income categories last year — a striking reversal of the long-standing narrative that active management doesn&#8217;t pay.
<h2 class="wp-block-heading">Treasury ETFs Take Center Stage</h2>
During the latest round of market upheaval, Treasury bond ETFs attracted billions of dollars in flows as investors flocked to find shelter from the tempest. According to Morningstar:
<ul>
<li>The Bronze-rated iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) attracted $2.6 billion between April 3 and April 7</li>
<li>The shorter-duration SPDR Portfolio Intermediate Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPTI#NYSE">SPTI</a>) attracted $1.6 billion. </li>
</ul>
Investors preferred low credit-risk vehicles but were still on the fence about the amount of interest rate risk they were willing to endure.
The Vanguard Total Bond Market ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>) and the iShares Core US Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>) were also in hot demand. Unlike past bear markets, however, these passive giants were matched by flows into actively managed &#8220;enhanced core&#8221; bond funds — strategies that try to beat the likes of AGG, <a href="https://www.cnbc.com/2025/04/07/bonds-are-back-in-market-crash-what-investors-are-buying-changed.html">according </a>to CNBC. Active enhanced core funds attracted five times more money than their passive counterparts in the core bond space this year, ETFaction says.
Also Read: <a href="https://www.benzinga.com/etfs/specialty-etfs/25/04/44767888/how-intels-ceo-pick-could-jolt-chip-stocks-and-etfs">How Intel&#8217;s CEO Pick Could Jolt Chip Stocks And ETFs</a>
<h2 class="wp-block-heading">The Emergence Of Ultrashort ETFs</h2>
Ultrashort bond ETFs were also front and center, serving as cash substitutes during the mayhem. 
According to Morningstar, the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) received $3.5 billion in inflows from April 3 to 7. The iShares 0-3 Month Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SGOV#NYSE">SGOV</a>) took in another $1.1 billion. 
With modest yields and little risk, these funds are now the parking lots of choice for investors who want to hold capital without locking it up for a longer duration.
Still, not all parts of the ultrashort segment thrived. Riskier plays like the Janus Henderson AAA CLO ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JAAA#NYSE">JAAA</a>) — which had tripled in size in just 12 months — saw a reversal of fortune, bleeding over $1 billion recently as investors moved away from higher credit risk, per Morningstar report.
<h2 class="wp-block-heading">What&#8217;s Next?</h2>
The Federal Reserve continues to fight inflation, while policy confusion hurts the economic outlook. Yet, bond market forces are in transition. Rather than simply going into hiding — they&#8217;re getting more subtle in their approach. Passive ETFs remain in the picture, but the increasing demand for actively managed Treasury and core bond funds represents a new fixed-income era.
As Treasury ETFs provide a sound hedge and active bond managers are justifying their role, the new bond market playbook may not be so passive after all.
Read Next: 
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<li><a href="https://www.benzinga.com/general/health-care/25/04/44746774/smart-investors-are-watching-these-3-etfs-after-surprise-jobs-data-beat">Smart Investors Are Watching These 3 ETFs After Surprise Jobs Data Beat</a></li>
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JAAA

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From Boring To Booming: How Treasury ETFs Are Beating The Bear

For the first time since the Great Recession, banks didn't park a single dollar in <a href="https://www.benzinga.com/topic/federal-reserve">the Federal Reserve</a>'s Reverse Repo Facility overnight. That's right—zero bids. 
The mother ship of the U.S. banking system, which has been the go-to safety net for surplus cash, found no takers.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="580" height="738" src="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04071824/Screenshot-2025-03-04-at-5.48.00-PM.png" alt="" class="wp-image-807933" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04071824/Screenshot-2025-03-04-at-5.48.00-PM.png 580w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04071824/Screenshot-2025-03-04-at-5.48.00-PM-236x300.png 236w" sizes="(max-width: 580px) 100vw, 580px" /></figure>
Source: <a href="https://www.newyorkfed.org/markets/data-hub">NewYorkFed website</a>
This isn't just an obscure balance sheet event. It's a flashing red warning light that bank liquidity is vanishing — fast.
<h2 class="wp-block-heading">Where Did All The Money Go?</h2>
After COVID stimulus flooded banks with cash, the Reverse Repo Facility ballooned to over $2 trillion in 2022-23. But as inflation eroded savings and delinquency rates climbed, that cash pile has been slowly draining. Now, we may have hit a breaking point.
Banks no longer have excess cash to lend to the Fed. More concerning? 
Interbank lending has already dried up. This suggests financial institutions could soon be forced into net borrowing mode — a signal of growing stress in the system.
<h2 class="wp-block-heading">Market Impact: Bonds, Stocks, What's Next</h2>
The bond market is reacting. Yields on Treasuries longer than two years are dropping fast, signaling investors believe rates have peaked. 
Five-Year Treasury Yield:
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="361" src="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070329/fredgraph-2-1024x361.png" alt="" class="wp-image-807923" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070329/fredgraph-2-1024x361.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070329/fredgraph-2-300x106.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070329/fredgraph-2-768x271.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070329/fredgraph-2.png 1320w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
10-Year Treasury Yield:
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="361" src="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070402/fredgraph-3-1024x361.png" alt="" class="wp-image-807924" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070402/fredgraph-3-1024x361.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070402/fredgraph-3-300x106.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070402/fredgraph-3-768x271.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2025/03/04070402/fredgraph-3.png 1320w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
They're locking in returns now before the next recession resets the game.
This capital shift is also dragging down stocks. Liquidity is the lifeblood of markets, and if banks are running on fumes, risk assets will feel the squeeze.
<h2 class="wp-block-heading">Actionable Plays: Where Investors Can Look Now</h2>
For those watching from the sidelines, here are key ETFs to monitor:
<ul>
<li>For Bond Bulls: If yields keep dropping, bond prices will rise. The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) and the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) are prime plays.</li>
<li>For Stock Protection: If liquidity crunch fears escalate, defensive sectors could shine. The Consumer Staples Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLP#NYSE">XLP</a>) and Utilities Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>) could offer stability.</li>
<li>For Financial Risk: Bank stress is mounting. The SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>) and Financial Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLF#NYSE">XLF</a>) will be key indicators of how this liquidity squeeze plays out.</li>
</ul>
This liquidity drain wasn't a surprise to those paying attention &#8211; but what happens next will be. 
Keep a close eye on the Fed's next moves, because the money spigot may be running dry.
Now Read:
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<li><a href="https://www.benzinga.com/25/03/44107516/autozone-q2-earnings-miss-estimates-revenues-grow-24">AutoZone Q2 Earnings: Miss Estimates, 2.4% Revenue Growth, Higher Inventory And More</a></li>
</ul>
Image: Shutterstock

Sector ETFs

Federal Reserve

No Bidders, No Safety Net: Is Fed's Liquidity Lifeline Drying Up? Plus, ETFs To Watch

As markets brace for the Federal Reserve's final policy meeting of the year, scheduled at 2:00 p.m. Wednesday, Goldman Sachs highlighted 20 exchange-traded funds (ETFs) that have historically shown outsized <a href="https://www.benzinga.com/topic/federal-reserve">moves around Fed decision days</a>.
While a 25-basis-point rate cut to a target range of 4.25%-4.50% is widely anticipated, the market's focus is on the Fed's forward guidance, particularly the Summary of Economic Projections (SEP) and the updated &#8220;dot plot.&#8221;
Following December's expected cut, Goldman Sachs projects a more measured pace of easing next year, forecasting rate cuts in March, June, and September, with the terminal rate seen at 3.50%-3.75%.
Read Also: <a href="https://www.benzinga.com/economics/macro-economic-events/24/12/42554114/all-eyes-on-december-fed-meeting-as-traders-await-interest-rate-projections">All Eyes On December Fed Meeting As Traders Await Interest Rate Projections</a>
<h3 class="wp-block-heading">Market Dynamics Around Fed Days</h3>
U.S. equity markets have displayed strong short-term gains during Fed meeting weeks in 2024. 
Investors employing a simple strategy of buying the S&amp;P 500 index at market close before a Federal Open Market Committee (FOMC) announcement and selling at close the following day have captured median returns of 1.1% across the past seven meetings.
Yet those extending the trade horizon to 15 sessions post-Fed meeting have enjoyed significantly larger average gains of 3.29%, more than double the short-term returns. Notably, every Fed meeting this year has resulted in positive 15-day returns.
"We observe that U.S. banking ETFs, such as SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>) and SPDR S&amp;P Regional Banking ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KRE#NYSE">KRE</a>), have seen unusually large moves on FOMC days since 2022" Goldman analysts wrote in a recent note.
For bond-focused investors, the report highlights consistent post-meeting gains in high-yield and investment-grade ETFs like iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LQD#NYSE">LQD</a>).
Meanwhile, energy-focused ETFs, such as the United States Oil Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USO#NYSE">USO</a>), have seen negative reactions. 
<h3 class="wp-block-heading">ETFs Showing Heightened Fed-Day Moves</h3>
Here's Goldman Sachs' list of 20 ETFs with the largest absolute moves – which include both positive and negative swing – on FOMC days:
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>ETF Name</th>
<th>Focus</th>
<th>Average Absolute Move on FOMC since 2022</th>
<th>Average Absolute Move (Last 3 FOMC events)</th>
</tr>
</thead>
<tbody>
<tr>
<td>SPDR S&amp;P Regional Banking ETF </td>
<td>Regional Banking</td>
<td>2.5%</td>
<td>1.5%</td>
</tr>
<tr>
<td>VanEck Semiconductor ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SMH#NASDAQ">SMH</a>)</td>
<td>Semiconductor</td>
<td>2.4%</td>
<td>3.7%</td>
</tr>
<tr>
<td>iShares Semiconductor ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/SOXX#NASDAQ">SOXX</a>)</td>
<td>Semiconductor</td>
<td>2.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P Bank ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/KBE#NYSE">KBE</a>)</td>
<td>US Large Banks</td>
<td>2.2%</td>
<td>1.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P Biotech ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XBI#NYSE">XBI</a>)</td>
<td>Biotech</td>
<td>2.0%</td>
<td>0.3%</td>
</tr>
<tr>
<td>United States Oil Fund </td>
<td>Oil</td>
<td>1.9%</td>
<td>2.0%</td>
</tr>
<tr>
<td>Technology Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLK#NYSE">XLK</a>)</td>
<td>Technology</td>
<td>1.9%</td>
<td>2.3%</td>
</tr>
<tr>
<td>iShares Silver Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SLV#NYSE">SLV</a>)</td>
<td>Silver</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
<tr>
<td>Invesco QQQ Trust (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>)</td>
<td>Nasdaq 100</td>
<td>1.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td>Consumer Discretionary Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLY#NYSE">XLY</a>)</td>
<td>Discretionary</td>
<td>1.6%</td>
<td>1.0%</td>
</tr>
<tr>
<td>iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>)</td>
<td>Russell 2000</td>
<td>1.5%</td>
<td>0.3%</td>
</tr>
<tr>
<td>SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)</td>
<td>S&amp;P 500</td>
<td>1.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td>Vanguard S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>)</td>
<td>S&amp;P 500</td>
<td>1.2%</td>
<td>0.9%</td>
</tr>
<tr>
<td>Financial Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLF#NYSE">XLF</a>)</td>
<td>Financial</td>
<td>1.1%</td>
<td>0.7%</td>
</tr>
<tr>
<td>SPDR Gold Shares (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>)</td>
<td>Gold</td>
<td>0.9%</td>
<td>1.4%</td>
</tr>
<tr>
<td>iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EMB#NASDAQ">EMB</a>)</td>
<td>EM Bond</td>
<td>0.8%</td>
<td>0.6%</td>
</tr>
<tr>
<td>iShares iBoxx $ High Yield Corporate Bond ETF </td>
<td>HY Corp Bond</td>
<td>0.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td>iShares iBoxx $ Investment Grade Corporate Bond ETF </td>
<td>IG Corp Bond</td>
<td>0.6%</td>
<td>0.7%</td>
</tr>
<tr>
<td>iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>)</td>
<td>7-10 Year Treasury</td>
<td>0.6%</td>
<td>0.7%</td>
</tr>
<tr>
<td>iShares TIPS Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TIP#NYSE">TIP</a>)</td>
<td>TIPS Bond</td>
<td>0.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td>Average</td>
<td></td>
<td>1.5%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
</figure>
Check Out: 
<ul>
<li><a href="https://www.benzinga.com/economics/macro-economic-events/24/12/42539116/fed-meetings-made-stock-traders-richer-in-2024-could-wednesday-bring-last-big-rally">Fed Meetings Made Stock Traders Richer In 2024: Could Wednesday Bring Last Big Rally?</a></li>
</ul>
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Analyst Color

New ETFs

Emerging Market ETFs

Currency ETFs

Previews

Markets

iShares JPMorgan USD Emerging Markets Bond Fund

iShares PHLX SOX Semiconductor Sector Index Fund

SOXX

Select Sector SPDR-Consumer Discretionary

20 ETFs Primed For Unusually Big Swings On Fed Meeting Days

Legendary investor Ken Fisher's hedge fund, Fisher Asset Management, grew the value of its portfolio by more than $14 billion dollars <a href="https://www.benzinga.com/personal-finance/24/09/41030896/why-ken-fisher-says-capital-preservation-could-cost-you-big-in-retirement">in the last quarter</a>.
Here's a look at the fund's most significant trades.  
Top Holdings: Fisher Asset Management reported approximately $244 billion in assets under management (AUM), according to an SEC<a href="https://www.sec.gov/Archives/edgar/data/850529/000085052924000012/xslForm13F_X02/primary_doc.xml"> filing</a>. 
Read Next: <a href="https://www.benzinga.com/trading-ideas/movers/24/11/41949068/bitcoin-could-reach-1-million-by-2037-economist-says-buy-of-a-lifetime-opportunity">Bitcoin Could Reach $1 Million By 2037, Economist Says: &#8216;Buy Of A Lifetime&#8217; Opportunity</a>
The firm also added small amounts to each of its top five positions: 
<ul>
<li>Apple, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AAPL#NASDAQ">AAPL</a>)</li>
<li>Microsoft Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MSFT#NASDAQ">MSFT</a>)</li>
<li>NVIDIA Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>)</li>
<li>Amazon.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMZN#NASDAQ">AMZN</a>) and </li>
<li>Alphabet, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/GOOGL#NASDAQ">GOOGL</a>). </li>
</ul>
Top Buys: Fisher Asset Management's top buy in terms of value was $2.09 billion in shares of the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) which provides targeted exposure to U.S. Treasury bonds with remaining maturities between seven and ten years. Treasury bonds are generally considered low-risk investments, which can help balance riskier assets in a diversified portfolio. 
The fund's second and third-largest buys were $850 million in shares of JPMorgan Chase &amp; Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JPM#NYSE">JPM</a>) and $490 million worth of shares of oil and natural gas producer ConocoPhillips (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/COP#NYSE">COP</a>). 
Top Sells: The hedge fund's top sells by value were $1.35 billion in shares of the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/LQD#NYSE">LQD</a>), $750 million worth of Walt Disney Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIS#NYSE">DIS</a>) shares and $710 million in shares of Ford Motor Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/F#NYSE">F</a>). 
New Holdings: One of the fund's most notable new holdings is Nu Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NU#NYSE">NU</a>), a digital banking services provider also backed by Warren Buffett. Fisher Asset management opened a position in Nu Holdings with approximately 7.23 million shares valued at more than $98.7 million.&nbsp;
The hedge fund also took a $28.3 million new position in wealth manager UBS Group AG (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UBS#NYSE">UBS</a>) and opened a $17.2 million position in the iShares MSCI China A ETF (BATS:<a class="ticker" href="https://www.benzinga.com/stock/CNYA#BATS">CNYA</a>), which tracks an index composed of Chinese equities available to international investors.
Why It Matters: Hedge funds often use sophisticated investment strategies and have access to extensive research which can provide insights into emerging market trends. Individual investors can track hedge funds for investment ideas, successful strategies or compare their own performance against professional investors.&nbsp;
Read Next:&nbsp;
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<li><a href="https://www.benzinga.com/general/biotech/24/11/41822473/trumps-potential-health-czar-robert-f-kennedy-jr-rattles-vaccine-stocks-shoot-first-reaction">Trump&#8217;s Potential &#8216;Health Czar&#8217; Robert F. Kennedy Jr. Rattles Vaccine Stocks: &#8216;Shoot First Reaction&#8217;</a></li>
</ul>
Image: Shutterstock

Movers

AAPL

AMZN

CNYA

GOOGL

MSFT

NVDA

Here's How Billionaire Ken Fisher's Hedge Fund Made $14 Billion Last Quarter

U.S. Treasuries are poised to come in even despite having a very volatile <a href="https://www.benzinga.com/news/treasuries">first six months of 2024</a>.
A Bloomberg index of returns in this bond market has declined a mere 0.1% for the year. It fell as much as 3.4% in April.
The rebound indicates that investor outlook might be positive in light of falling U.S. prices prompting the Federal Reserve to cut interest rates sooner. 
"We've seen the peak in yields," Stephen Miller, investment strategist at GSFM in Sydney, told <a href="https://www.bloomberg.com/news/articles/2024-06-19/treasuries-a-whisker-away-from-erasing-2024-losses-on-rates-bets?srnd=homepage-americas&amp;sref=TBDibEcD">Bloomberg</a>. "Bonds are now back as having a deserved place in a multi-asset portfolio."
Treasuries have been sent in opposite directions in 2024 as policy-sensitive two-year yields have soared above 5% in April as fears over higher-for-longer U.S. rates spurred investors to dump bonds.
Also Read: <a href="http://Tokenized US Treasury Notes Market Value Exceeds $1B: Report">Tokenized US Treasury Notes Market Value Exceeds $1B &#8211; Report</a>
They have since returned to around 4.7% as inflation-to-retail-sales data suggested the U.S. economy may finally be cooling enough to justify lower borrowing costs.
Fed Governor Adriana Kugler <a href="https://www.benzinga.com/top-stories/24/06/39391685/fed-members-cool-on-raising-interest-rates-these-conditions-could-take-months-and-more-likely-quarte">said on Tuesday </a>that it will likely be appropriate for the central bank to reduce rates "sometime later this year" if economic conditions unfold as anticipated. 
St. Louis Fed President Alberto Musalem said in his first major policy speech that it could take "quarters" for the data to support a cut.
Volatility in the $27 trillion Treasury market has fallen from recent highs as the views of the Fed and investors over the number of rate cuts expected this year have begun to gel. 
The ICE BofA&nbsp;MOVE&nbsp;Index — a gauge of bond volatility that tracks anticipated swings in US yields based on options — is hovering at about 98, down from an April high of 121, Bloomberg reported.
Price Action: SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) remained flat before Thursday&#8217;s opening bell, while iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) declined 0.4%; iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) fell 1% in pre-market trading on Thursday.
Read Now: <a href="https://www.benzinga.com/markets/cryptocurrency/24/02/36948187/janet-yellen-sounds-alarm-on-crypto-risks-in-congressional-testimony-urges-legislative-act">Janet Yellen Sounds Alarm On Crypto Risks In Congressional Testimony, Urges Legislative Action</a>

US Treasuries Set To Break Even After Rocky First Half Of 2024

The U.S. economy grew at an annualized rate of 1.3% in the first quarter of 2024, marking a downward revision from the <a href="https://www.benzinga.com/markets/equities/24/05/39085465/us-q1-economic-growth-downwardly-revised-to-1-3-consumer-spending-falters">advance estimate of 1.6%. </a>
This represents the slowest growth rate since the second quarter of 2022. The revision was primarily driven by a decrease in real consumer spending, which was adjusted down from 2.5% to 2%.
The GDP report from the Bureau of Economic Analysis, released Thursday, also indicated a slight downward adjustment of 0.1 percentage points in both the headline and core Personal Consumption Expenditure (PCE) price index for the last quarter.
The slower-than-expected growth and marginally lower inflation figures eased Treasury yields, with the 10-year benchmark note falling 5 basis points to 4.57%. This drop sent bond ETFs higher, with the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) rising 0.4%.
The critical question remains whether these developments will ease the pressure on the Federal Reserve to cut interest rates, or if further inflation reports are needed to gain a more comprehensive understanding of economic dynamics.
<h3 class="wp-block-heading">5 Economists React To Q1 GDP, PCE Data</h3>
<ol>
<li>Chris Zaccarelli: The chief investment officer at Independent Advisory Alliance views the recent economic data as &#8220;a double-edged sword.&#8221; Slowing personal consumption signals that economic expansion is cooling. This could concern companies and stock market investors. But it also suggests that inflation is declining. This could eventually allow the Fed to reduce interest rates. Inflation will likely remain &#8220;relatively sticky&#8221; and the Fed will stay on the sidelines for most of 2024. Still, Zaccarelli remains optimistic about corporate profits and an ongoing bull market for stocks. </li>
<li>Jeffrey Roach: The chief economist at LPL Financial notes how consumer spending was weaker than initially reported, reducing the headline growth to 1.3% annualized. He highlighted that consumer momentum is slowing due to persistent inflation pressures. However, he sees a positive aspect in business investment, particularly in new technologies like artificial intelligence. </li>
<li>Bill Adams, chief economist at Comerica Bank, emphasizes that the Fed's tight interest rate policy is &#8220;clearly visible&#8221; in the first quarter GDP report. The significant decline in interest-rate sensitive multifamily residential investments highlights the broader economic impact. Adams also notes that a less accommodative fiscal policy has contributed to the pullback in durable goods spending. Revisions to economic growth and inflation might prompt the Fed to consider reducing interest rates by September. Adams also highlights that a cooler economy is limiting businesses&#8217; ability to raise prices, which could help slow inflation in the second half of 2024. </li>
<li>Sam Stovall, chief investment strategist at CFRA Research, views the slower Q1 GDP growth as somewhat encouraging but cautions that these data are subject to further revisions. Stovall anticipates that the Fed might start cutting rates as early as September, though he is less confident about this timeline compared to earlier predictions. &#8220;We had been saying for a while that we thought we&#8217;d get 2 cuts this year, September and December. But I would tend to say that we are becoming less confident about the start in September,&#8221; he said. He believes that once the Fed begins cutting rates, it could benefit stocks, particularly in interest-sensitive sectors like financials and real estate. </li>
<li>Diane Swonk: &#8220;The largest downward revision was consumer spending. This echoes challenges retailers cite,&#8221; KPMG US chief economist wrote on X. &#8220;Big ticket durable goods, which require financing, contract the most.&#8221; She observes that credit card usage has flatlined, with subprime and young borrowers hitting their limits. Swonk highlights an increase in business investment, driven by spending on chip plants, despite a slowdown in government spending.</li>
</ol>
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
<div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">An acceleration in spending on services, where inflation remains hottest, was tempered by a &#x2b07;&#xFE0F; in spending on goods. This echos challenges retailers cite. Big ticket durable goods, which require financing, contracts the most. Credit card usage flatline, as subprime &amp; young…
&mdash; Diane Swonk (@DianeSwonk) <a href="https://twitter.com/DianeSwonk/status/1796174231937417593?ref_src=twsrc%5Etfw">May 30, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
</figure>
Swonk suggests that inflation improvements in late 2023 were overstated and that inflation remains a significant issue. &#8220;The net result is that inflation is still too hot for too many, which is keeping the Federal Reserve from cutting rates.&#8221;
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/05/39068979/how-to-trade-us-elections-a-trump-victory-is-likely-to-lead-to-a-stronger-dollar">How To Trade US Elections: &#8216;A Trump Victory Is Likely To Lead To A Stronger Dollar&#8217;</a>
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Is Q1 GDP Data Easing Pressure On Fed To Cut Interest Rates? 5 Economists Weigh In

The Federal Reserve&#8217;s recent policy decision kept interest rates unchanged, continuing since July 2023. However, it announced a significant reduction in its quantitative tightening (QT) program, <a href="https://www.benzinga.com/federal-reserve">starting in June</a>. 
QT involves selling off assets to decrease money supply and raise interest rates. This move follows massive bond purchases during the pandemic, which suppressed interest rates. While QT can help control inflation, it also reduces liquidity in the economy and can lead to higher interest rates and tighter monetary conditions. 
The Fed aims to avoid a repeat of the 2019 &#8220;repo crisis&#8221; caused by QT, and plans to scale back QT to $25 billion, more than half of its current rate.
Related: <a href="https://www.benzinga.com/economics/macro-economic-events/24/05/38584705/federal-reserve-takes-cautious-stand-on-inflation-powell-signals-preference-for-r">Federal Reserve Takes Cautious Stand On Inflation, Powell Signals Preference For Rate Cuts Over Hikes</a>
<h1 class="wp-block-heading">Redditors Question the Effectiveness of Fed&#8217;s Decision</h1>
Reddit discussions on r/stocks provided valuable insights into the Federal Reserve&#8217;s recent decision to reduce quantitative tightening (QT) and its potential impact on inflation and the economy. 
Redditors expressed diverse opinions, ranging from concerns about inflation to the Fed&#8217;s motives and the broader economic implications.
Redditors like jigglyjohnson13 questioned the effectiveness of the Fed&#8217;s decision, citing concerns about inflation and the M2 money supply. They suggested that the Fed may be influenced by the theory that COVID-19 relief caused an explosion in M2, making it challenging to bring inflation down.
Others, such as 95Daphne and goodbodha, believe that the Fed&#8217;s decision is driven by the need to maintain stability in the banking system. They argue that the Fed is trying to prevent a financial accident, similar to what happened in the past, and ensure that banks have sufficient reserves.
Some, like Malamonga1 and Invest0rnoob1, see the Fed&#8217;s decision as a means to stimulate the economy. They suggest that while the decision may not directly address inflation, it could prevent a crash and support banks facing challenges.
<blockquote class="wp-block-quote">&#8220;I think the economy is doing worse than they are admitting. It's mostly being propped up by government spending. They are slowing QT to prevent a crash.&#8221;
<cite>Redditor <a href="https://www.reddit.com/r/stocks/comments/1chwj1e/comment/l25cvuh/?utm_source=share&amp;utm_medium=web3x&amp;utm_name=web3xcss&amp;utm_term=1&amp;utm_content=share_button">Invest0rnoob1</a></cite></blockquote>
<h1 class="wp-block-heading">Impact On Investment Strategies</h1>
Redditors like fairlyaveragetrader believe the Fed&#8217;s decision could impact investment strategies. They suggest the decision could make long-term bonds more attractive and lead to lower rates over the next 18 months, affecting stock investments and overall market outlook.
<blockquote class="wp-block-quote">&#8220;Inflation is really only being pushed by two things, housing and auto insurance and neither of those are responsive to QT. What the Fed did today is tell you to buy bonds. The fact they are slowing down the selling is going to make the long end more attractive. Rates overall, over the next 18 months, likely to fall.&#8221;
<cite>Redditor <a href="https://www.reddit.com/r/stocks/comments/1chwj1e/comment/l25wz4a/?utm_source=share&amp;utm_medium=web3x&amp;utm_name=web3xcss&amp;utm_term=1&amp;utm_content=share_button">fairlyaveragetrader</a></cite></blockquote>
ETFs such as the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), the Vanguard Long-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NASDAQ">VGLT</a>), and the SPDR Portfolio Long Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPTL#NYSE">SPTL</a>) provide exposure to long-term Treasury bonds. The iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) is a popular way to get exposure to medium-to-long-term Treasury bonds.
The diverse opinions expressed by Redditors highlight the complexity of the Federal Reserve&#8217;s decision-making process and its potential impact on various aspects of the economy. 
Investors should consider these perspectives when analyzing the implications of the Fed&#8217;s decision on their investment strategies.
Read Next: <a href="https://www.benzinga.com/news/earnings/24/05/38593416/wall-street-inches-up-post-fed-chipmakers-rebound-gold-crude-falter-whats-driving-market-thursday">Wall Street Inches Up After Powell&#8217;s Inflation Remarks; Chipmakers Rebound; Gold, Crude Falter: What&#8217;s Driving Markets Thursday?</a>
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Redditors Question Change To Fed Policy: Are They 'Slowing QT To Prevent A Crash'?

Federal Reserve&nbsp;Chair&nbsp;Jerome Powell&nbsp;stated on Tuesday that a prolonged period of&nbsp;<a target="_blank" href="https://www.benzinga.com/etfs/broad-u-s-equity-etfs/24/04/38278182/powell-delays-fed-rate-cuts-we-need-greater-confidence-in-inflation-2-year-yields-spik" rel="noreferrer noopener">restrictive monetary policy</a>&nbsp;may be necessary, refraining from offering explicit guidance on a rate-cutting strategy. Economists interpreted this as a clear indication that the central bank is likely to maintain a &#8220;higher for longer&#8221; approach.
The Hawkish Schiff: Economist&nbsp;Peter Schiff, in a post on X (formerly Twitter), challenged Powell&#8217;s characterization of the current monetary policy as restrictive, asserting that it remains loose. Schiff advocated for rate hikes, expressing concerns that prolonged loose policy would exacerbate inflationary pressures.
&#8220;The longer the Fed maintains its current policy, the further away from 2% inflation will rise,&#8221; he said.
Schiff&#8217;s remarks come against the backdrop of a robust economy and strong job growth.&nbsp;
However, some economists, like Nobel laureate&nbsp;Paul Krugman, argue that consumer price inflation may not accurately reflect economic conditions, suggesting alternative measures such as the harmonized index of consumer prices, which excludes the owner-equivalent rent.
See Also:&nbsp;<a target="_blank" href="https://www.benzinga.com/money/best-inflation-stocks" rel="noreferrer noopener">Best Inflation Stocks</a>
Higher For Longer: Jamie Cox, Managing Partner at Harris Financial Group, said Powell picked a bad timing to have a &#8220;communication problem on the path of rates this year.&#8221;
The economist, however, does not see the need for rate hikes, given the strong labor market, unaffected and consumer spending, The typical consequences of hiking rates weren&#8217;t apparent in the economy, he said. 
The economist also had a piece of advice for investors. &#8220;Markets need to focus on the fact that rates are sufficiently restrictive, instead of how many cuts are in the pipeline,&#8221; he said.
LPL Chief Economist Jeffrey Roach said Powell&#8217;s speech underlined his lack of confidence in inflation dynamics. &#8220;The Fed will likely stay on hold for longer than originally planned,&#8221; he said.
The central bank chief&#8217;s Q&amp;A session showed that supply constraints were continuing to add to inflationary pressures and this could make it hard for the Fed, Roach said. 
The bond market reacted to his comments, with investors now slowly coming to terms with the possibility of the central bank remaining on hold for most of this year, he said, adding, &#8220;Investors are reassessing risk appetite as Chair Powell is not confident that inflation is cooling enough for rate cuts.
LPL Chief Global Strategist Quincy Krosby said Powell was entering the &#8220;hawkish policy lane.&#8221; The Fed Chair essentially implied that the downward trajectory of inflation has essentially stalled, the analyst said.
&#8220;Moreover, he made it clear &#8211; rather than his more ambiguous stance regarding a rate easing timetable &#8211; that the &#8216;higher for longer&#8217; narrative remains intact,&#8221; Krosby said.
‌&#8221;This was unfriendly for equity markets, but markets got the message.&#8221;
The 10-year bond yield edged higher and is approaching the 4.7% level, which it previously hit in early November 2023. 
The major index futures are trading lower, pointing to another lackluster session on Wednesday.
The iShares 7-10 Year Treasury Bond ETF&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) settled Tuesday&#8217;s session down 0.39% at $91.36 and the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) fell 0.18% before closing at $503.53, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38085675/were-fd-says-rich-dad-poor-dad-author-robert-kiyosaki-because-fed-chair-powell-fina">&#8216;We&#8217;re F&#8217;d,&#8217; Says &#8216;Rich Dad Poor Dad&#8217; Author Robert Kiyosaki Because Fed Chair Powell &#8216;Finally Admitted Inflation Is Winning&#8217;</a>
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Jerome Powell Back In Hawkish Policy Lane? Why Economists Feel Fed's 'Higher For Longer' Narrative Hasn't Changed: 'Markets Need To Focus On The Fact That...'

Iran launched a barrage of explosive drones and missiles towards Israel late on Saturday in its first direct attack on Israeli soil, prompting concerns of a significant escalation. Sirens blared in Israel, as reported by Reuters, and distant booming sounds were heard, likely from the interception of the drones.
Israel said it identified 300 &quot;threats of various types&quot; and eliminated &quot;99%&quot; of those bound for Israeli soil, according to an update from an Israel Defense Forces spokesperson, as quoted on CNBC. Iran&#39;s Revolutionary Guards seized a cargo ship in the Strait of Hormuz on Saturday, saying the vessel, associated with Israel, prompted heightened alert levels due to the possibility of a direct Iranian attack,
This could escalate a decades-old standoff between the two regional adversaries. Notably, the Gaza war between Israel and Hamas, now entering its seventh month, has heightened tensions in the region, extending to conflicts with Lebanon and Syria. Additionally, long-range attacks targeting Israeli interests have originated from Yemen and Iraq.
<h3>Market Impact</h3>
Investors are likely to take this clash seriously and rush toward fear-induced selling. The sudden rise of chaos in the market brightened the appeal for safe haven assets. Volatility ETFs which track the implied volatility of the market also surged thanks to the massacre in the stock market. iPath Series B S&amp;P 500 VIX Short-Term Futures ETN (BATS: <a class="ticker" href="https://www.benzinga.com/stock/vxx#BATS">VXX</a>) has added about 4.2% past week and rose 8.8% on Friday and advanced about 1% after hours on Apr 12.
Below, we highlight a few of the biggest gainers from the latest sell-off in the stock market. Also, these ETFs may continue to shine should tensions persist in the global economy in the near term.
<h3>Gold</h3>
Gold is often viewed as a hedge against market risk. The metal has seen some strength lately thanks to this market turmoil. Gold bullion ETF SPDR Gold Trust (ARCA:GLD) has gained 0.4% in the past five days. It added 0.14% in after hours on Apr 12.
<h3>Long-Term U.S. Treasury</h3>
U.S. 10-year benchmark treasury yield slumped to 4.50% on Apr 12, 2024, down from 4.56% recorded on Apr 11 despite talks of higher-for-longer rates due to rise in volatility in the markets. Notably, U.S. Treasuries are also perceived as risk-free asset class which is why iShares Barclays 20 Year Treasury Bond Fund (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>) and iShares Barclays 7-10 Year Treasury Bond Fund (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>) added about 0.5% and 0.4% on Apr 12, 2024.
<h3>U.S. Dollar</h3>
The U.S. dollar is often viewed as a safe haven currency due to their strong liquidity and stable political systems. With the Fed likely to keep rates higher for longer due to sticky inflation, the U.S. dollar is likely to remain strong over the medium term. Invesco DB US Dollar Index Bullish Fund (ARCA:UUP) can thus be played here.
<h3>Bottom Line</h3>
Although we do not expect this bearish trend to continue for long especially in the United States, which has a strong trend underneath, the upheaval in the stock market may persist for a week or so courtesy of the gloomy global backdrop and an oil price rally (due to crisis in the oil-rich Middle East). However, as the earnings season unfolds, this fluffy market should take a solid shape and decide on the fate of several asset classes and sectors.
<a href="https://www.zacks.com/stock/news/2255601/3-safe-haven-etfs-to-gain-on-middle-east-crisis?cid=CS-BENZ-FT-etf_news_and_commentary-2255601">To read this article on Zacks.com click here.</a>

Barclays Bank iPath S&P 500 VIX Short-Term Futures ETN

3 Safe-Haven ETFs to Gain on Middle East Crisis

U.S. Treasury yields have reached their highest levels since mid-November 2023, driven by a mix of economic resilience, persistent fiscal spending <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38186082/this-puts-the-fed-in-quite-a-tricky-position-7-economists-weigh-in-on-march-inflati">and resuming inflationary pressures. </a>
These factors are steering the market&#8217;s expectations away from earlier predictions of imminent Federal Reserve rate cuts, significantly impacting the cost of issuing U.S. government debt.
<h1 class="wp-block-heading">Treasury Bond ETFs Fall To Mid-November 2023 Lows</h1>
On Monday, the yield on the 10-year Treasury note hit 4.61%, a peak not observed since Nov. 14, 2023. 
This represents a substantial increase of approximately 40 basis points since the beginning of the month.
Additionally, the daily chart for the 10-year Treasury yield shows the 50-day and 200-day moving averages have created a &#8220;golden cross&#8221; pattern, signaling the confirmation of an uptrend and the possibility of further increases, with the next resistance level now projected at 5%.
Concurrently, bond ETFs have experienced notable declines. The iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) fell to its lowest level since Nov. 13, 2023, reflecting a 5.6% decrease since its February 2024 high. 
The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) has seen an even steeper drop, falling more than 11% from its January peak.
<h1 class="wp-block-heading">Chart: US 10-Year Yields For Golden-Cross Pattern</h1>
<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/2024/04/15163420/image-80-1024x495.png" alt="" class="wp-image-292683" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/04/15163420/image-80.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h1 class="wp-block-heading">Hot Economic Data Fuels Speculation On Fewer And Delayed Fed Rate Cuts</h1>
Recent robust U.S. economic indicators have contributed to a shift in market expectations regarding the Federal Reserve&#8217;s actions. 
March 2024 saw U.S. retail sales jump unexpectedly by 0.7%, against <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/04/38253316/us-retail-sales-boom-well-above-forecasts-rise-4-on-the-year-blowout-report-economi">a forecast of 0.3%</a>. This comes on the heels of higher-than-expected inflation figures and a tighter-than-expected jobs report earlier in the month.
Originally, markets had anticipated the Fed to start reducing rates in June 2024, with a total of three cuts throughout the year. However, current speculations suggest the Fed might only implement a single rate cut this year. 
Traders now see only a 20% probability of a June rate cut and the anticipated overall easing for 2024 stands at around 40 basis points, indicating fewer than two quarter-percentage-point cuts.
<h1 class="wp-block-heading">Analysts Reassess Fed&#8217;s Rate Path: UBS Sees Fed Hiking Again</h1>
Analysts have quickly adjusted their forecasts on Fed interest rates in response to this shift in economic signals. 
A significant caution came from UBS Group AG strategists Jonathan Pingle and Bhanu Baweja, who highlighted the risk of inflation not decreasing to the Fed&#8217;s target, potentially necessitating a return to rate hikes and triggering a significant downturn in bonds and stocks.
As reported by <a href="https://www.bloomberg.com/news/articles/2024-04-15/fed-hiking-rates-to-6-5-is-real-risk-for-ubs-strategists?srnd=homepage-americas&amp;sref=TBDibEcD">Bloomberg</a>, they warned of a possible return to rate hikes if inflation remains above 2.5%, predicting that the Federal Funds rate could reach 6.5% by mid-next year.
The UBS team described a &#8220;no-landing scenario&#8221; where further rate hikes could lead to a significant flattening of the U.S. Treasury curve and a potential 10%-15% decline in stock market values. 
They also forecasted wider credit spreads and a considerable adjustment in market multiples, cautioning that investors are beginning to worry about an overheated economy that could maintain high inflation level.
Photo: Funtap on Shutterstock

Bond Yields Surge To 6-Month Highs As Likelihood Of No-Landing Scenario Increases: UBS Warns Of Potential Fed Rate Hikes To 6.5%

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

In March, the U.S. labor market surged beyond predictions, with 303,000 nonfarm payrolls added, surpassing expectations of 212,000. This marked the highest figure since May 2023 and accompanied a slight decrease in the <a href="https://www.benzinga.com//node/38108835">unemployment rate from 3.9% to 3.8%</a>. 
We covered it first here: <a href="https://www.benzinga.com//node/38108835">US Labor Market Heats Up In March: Payrolls Grow By 303,000, Highest In 10 Months, Dampen June Rate Cut Hopes</a>
The robust report dashed hopes for Federal Reserve rate cuts, exacerbated by hawkish comments from Fed speakers, further dampening investor expectations.
The unexpected decrease in the unemployment rate from two-year highs and the anticipated rise in earnings signaled a tight labor market also reinforces the Federal Reserve&#8217;s stance against immediate interest rate cuts.
<h2 class="wp-block-heading">Economists Insights: March Jobs Report Dashed Hopes Of Rate Cut</h2>
The March jobs report has elicited diverse responses from economists and market analysts. Let&#8217;s delve into their viewpoints, capturing their original statements or key phrases to provide a comprehensive insight into the implications.
Joseph Brusuelas, Chief Economist at RSM US LLP, recognized as the best rate forecaster of 2023 by Bloomberg, shed light on the policy implications of the report. With wage growth slowing accompanying topline employment increases, Brusuelas sees the Fed relaxing a restrictive policy rate, given the PCE deflator continues to improve.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">US Jobs Report Policy Implications: With wage growth slowing to 4.1% from 4.3% while topline employment increased at 303K-276K 3 mo avg &amp; 244K 6mo avg-the Fed can relax a restrictive policy rate pending ongoing improvement in the PCE deflator.
&mdash; Joseph Brusuelas (@joebrusuelas) <a href="https://twitter.com/joebrusuelas/status/1776231519939408025?ref_src=twsrc%5Etfw">April 5, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
</figure>
In his review note, Brusuelas emphasized the significance of acknowledging the increase in labor supply and rising productivity when formulating policies to avert unnecessary economic slowdowns and unemployment spikes. 
The March jobs report underscores &#8220;American Exceptionalism&#8221;, showcasing the nation&#8217;s superior economic performance compared to its counterparts, with sustained job gains averaging 276,000 over the past three months. 
This trend aligns with a favorable economic condition known as the &#8220;3-2 condition,&#8221; characterized by low unemployment rates and stable inflation, fostering conditions for robust growth and price stability.
According to Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, March&#8217;s &#8220;blowout jobs numbers&#8221; indicate sustained economic strength, suggesting that consumer spending is likely to remain stable in the short term.
However, &#8220;this good news is bad news for the bond market&#8221; he said. It reduces the likelihood of earlier and more frequent rate cuts by the Federal Reserve, potentially delaying the first cut until July.
Nonetheless, this situation may bode well for the stock market, given that investor focus on consumer spending and corporate profits could drive stock prices higher.
Rob Swanke, senior equity strategist for Commonwealth Financial Network sees rate cut expectations in June remaining at around 60%. &#8220;Participation rose, and average hours worked rose which could help boost real income and spending in the economy without driving up inflation,&#8221; he said. Overall, Swanke sees the report increasing confidence in the economy.
Jeffrey Roach, chief economist at LPL Financial, attributed the strong job growth in the construction sector to &#8220;the demand for new homes amid low inventory.&#8221; According to Roach, although the likelihood of a Federal Reserve rate cut in June exceeds 50%, traders should consider the prospect of the European Central Bank cutting rates before the Fed. Roach advises investors to closely monitor fluctuations in the dollar during this period of uncertainty.
Quincy Krosby, chief global strategist for LPL Financial sees the numbers complicating the Fed&#8217;s goals. While headline numbers present challenges, average hourly wages provide some clarity, per Krosby. 
Despite the unemployment rate decreasing to 3.8%, the slight decline in hourly wages, crucial for assessing inflationary trends, has led to positive equity futures but upward movements in the 2-year Treasury yields and 10-year Treasury yields. Krosby noted the report bolsters the Fed&#8217;s position, highlighting that data showing a decline in inflation must accelerate to be impactful.
<h2 class="wp-block-heading">Market Reaction: Stocks And Dollar Gained, Bonds Fell</h2>
Treasury yields soared, with the 10-year yield surging above 4.35% and bonds fell. The&nbsp;iShares 20+ Year Treasury Bond ETF&nbsp;(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) was down&nbsp;0.95% while the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) was down 0.44% by 10:50 AM ET on Friday.
U.S. equity, as represented by the&nbsp;SPDR S&amp;P 500 ETF Trust&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) was up 0.85% while the tech-focused&nbsp;Invesco QQQ Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NYSE">QQQ</a>) had gained 1.14% by 10:50 AM ET.
The U.S. dollar gained, with the Invesco DB US Dollar Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) up 0.18%.
Read Next: <a href="https://www.benzinga.com/fintech/24/04/38110804/top-10-us-corporate-bonds-by-market-performance-in-2024-april-update">Top 10 US Corporate Bonds By Market Performance In 2024: April Update</a>
Image: Shutterstock

Analyst Ratings

March's 'Blowout' Jobs Numbers Underscore 'American Exceptionalism': 5 Economists Analyze 2024 Rate Cut Implications

The yields on U.S. Treasury notes have almost entirely retraced their surge following the release of the hotter-than-expected <a href="https://www.benzinga.com/markets/equities/24/02/37156844/retail-sales-sink-in-january-manufacturing-indicators-improve-jobless-claims-fall-thursdays-econ">January inflation report</a>. 
This indicates a swift shift in investor sentiment amidst conflicting economic indicators.
The 10-year Treasury note saw a decrease to 4.21% during Thursday morning&#8217;s trading in New York. This marks a five basis point drop after a six basis point decline the previous day. This movement erased the gains seen in the wake of the inflation data. Yields are back to their pre-report levels of approximately 4.17-4.18%.
Despite a higher-than-expected inflation rate for January, the anticipated impact on longer-dated maturities was short-lived. The 30-year Treasury note yield returned to 4.4%, aligning exactly with its position before the Consumer Price Index (CPI) announcement. 
However, a slight uptick remains in the two-year note, which, despite falling to 4.54%, is still about 8 basis points above its pre-inflation report trading figures.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="493" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1024x493.png" alt="" class="wp-image-217625" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1024x493.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-300x144.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-768x370.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34-1536x739.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/15104613/image-34.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Retail Sales Data Prompts Fed Cut Bets: The probability of Fed rate cuts in May and June 2024 has increased.
In January, retail sales contracted by 0.8% from a month earlier, marking a sharp reversal from December&#8217;s 0.4% surge. It is the biggest drop in retail sales since the bank crisis of March last year. On an annual basis, retail sales rose 0.6%, reflecting a sharp decline from December&#8217;s 5.3% annual rate. 
This has led traders to anticipate earlier rate reductions, with a June rate cut now seen as almost certain, boasting an 86% probability, while a downward adjustment in the fed funds rate by July is nearly fully anticipated by market participants. 
Money markets are currently forecasting a total of 105 basis points in rate cuts by the end of 2024, according to CME Group&#8217;s Fed Watch. 
The bond market responded positively to these developments, with rallies on Wednesday and continued strength into early Thursday trading as yields softened. 
Notably, the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>) and the iShares 7-10 Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>) both experienced gains, opening 0.9% and 0.5% higher on Thursday. 
Read Now: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37139816/2008-big-short-oracle-burry-bets-big-on-chinese-giants-backs-google-amazons-ai-wave">2008 &#8216;Big Short&#8217; Oracle Burry Bets Big On Chinese Giants, Backs Google, Amazon&#8217;s AI Wave</a>
Image: Shutterstock

Retail Sales

Treasury Yields Almost Fully Erase Post-Inflation Data Surge As Poor Retail Sales Reignite Fed Cut Hopes

<h3>Let&#39;s Rewind</h3>
2022 and 2023 were hectic - war, bank crises, and bear markets.
Inflation was still running rampant - with the core PCE having just peaked at +6.4% in February 2022. These consistent out-of-control inflation reports caused the Federal Reserve to take action by&nbsp;doing the only thing they know how to do -&nbsp;raise interest rates.
Starting in March 2022, the Fed raised rates at the fastest speed in modern history - from essentially 0% to 4.75% in only 12 months. As you can imagine, this rapid increase in interest rates caused bond prices to go into a free fall.
<div>
For those of you unaware, bond prices move inversely with interest rates.
Think about it like this - if you&#39;re an investor looking to generate fixed income inside of your portfolio, buying bonds might seem like a&nbsp;good idea.
However, as the months tick by and interest rates continue to rise, the value of the older bonds begins to fall -&nbsp;who wants to own a bond paying 3% ... if you can own a bond paying 5%.
Now, after nearly two years of consistent interest rate hikes, it seems like the Federal Reserve might be taking a break -&nbsp;at least that&#39;s what the market is hoping for.
Since mid-October, the price of the iShares 7-10 Year Treasury Bond ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ief#NASDAQ">IEF</a>) has begun to make a comeback, having traded up +8.9%. With inflation now showing consistent contraction, the market is not only pricing in a Federal Reserve &quot;pause,&quot; but also interest rate cuts in 2024.&nbsp;
<h3>Fast Forward</h3>
Looking ahead to 2024 and 2025 - investors believe there are several reasons to be excited about adding core aggregate bond exposure to their portfolios. Bonds help provide stability in a multi-asset portfolio - coupon payments generate income, and bond prices tend to rise when economic growth slows.
Considering the slowing economic climate and current interest rates, bonds might be able to deliver on both of those fronts in 2024.
Aross many sectors of the bond market, yields have reached highs not seen since 2007. For example, the yield on a 5-year Treasury Bond is +241&nbsp;bps above the dividend yield of the S&amp;P 500 (ARCA:SPY) at the moment. The only negative yielding debt left in the entire world is in Japan.&nbsp;
I think strong performance will begin in 2024. We could experience modest price appreciation as yields fall while paired with a very attractive bond yield. Economic growth should continue to slow, inflation will continue to cool, and central banks will begin to reverse their rate-hiking cycles.
Choosing bonds within the 3-10 year maturity range offers investors an attractive yield while being less exposed to longer-term risks regarding government deficits.
<h3>My Personal Choice</h3>
The&nbsp;Neos Enhanced Income Aggregate Bond ETF (ARCA:BNDI)&nbsp;allows me to capture 2-2.5% more income per year while adding negligible risk to my well-diversified portfolio.&nbsp;
According to the <a href="https://neosfunds.com/wp-content/uploads/BNDI-Prospectus.pdf">prospectus</a>, the Neos Enhanced Income Aggregate Bond ETF seeks to achieve its investment objective of generating monthly income in a tax-efficient manner by...
<blockquote>&quot;(i) Investing 80% or more of its assets in bonds or ETFs that ... obtain exposure to the performance of the US Aggregate Bond market and (ii) selling and purchasing S&amp;P 500 Index put options to generate income to the Fund beyond what is received from the Underlying Investments.&quot;
</blockquote>
The prospectus also clearly states their intention to hold US Treasury bonds, government-related bonds, corporate bonds, mortgage-backed pass-through securities, commercial mortgage-backed securities and asset-backed securities to obtain exposure to the US Aggregate Bond market.
After looking at their <a href="https://neosfunds.com/bndi/#holdings">holdings</a> (as of 12/27/23), I&#39;ve confirmed this is the case - as the vast majority of the Fund&#39;s assets are invested evenly between the Vanguard Total Bond Market Index Fund ETF (<a href="https://www.benzinga.com/quote/BND">BND</a>), and the iShares Core US Aggregate Bond ETF (<a href="https://www.benzinga.com/quote/AGG">AGG</a>).&nbsp;
Their holdings also show us that their fund managers are buying put options on the S&amp;P 500 Index with a strike price about 9.5% below the current price of the S&amp;P 500 Index (4,781&nbsp;at the time of writing) - while simultaneously selling put option contracts about 5.5% below the current price of the S&amp;P 500 Index.
It&#39;s important to note that these put option contracts have expiration dates roughly two weeks out from the time of purchase.
Year-to-date, BNDI has paid $2.52 per share to their investors. This $2.52 figure roughly equates to the 5.53% distribution yield <a href="https://neosfunds.com/bndi/">shown here on their website</a>.&nbsp;
When taking into consideration the forward dividend yield of the underlying investments inside of BNDI as shared earlier - the fund managers are generating +239&nbsp;bps of additional yield on top of the already 3.14% yield produced by the fund&#39;s underlying investments.
They&#39;re doing this while taking on negligible risk, as shown on <a href="https://neosfunds.com/monthly-income-etfs/">this page of their website</a>.&nbsp;
If you compare Scenario 1: Hypothetical core asset allocation&#39;s portfolio yield and 1-yr standard deviation to Scenario 3&#39;s - you&#39;ll see that when you replace traditional fixed income securities with BNDI the portfolio&#39;s overall yield increased dramatically while 1-yr standard deviations remains nearly the same.
That&#39;s the secret sauce here with BNDI - when owned inside of a well-diversified portfolio, investors can expect heightened portfolio yield with near-identical risk.
<h3>Risks</h3>
As with all investment ideas, this one doesn&#39;t come without its risks. In my opinion, there are two main risk factors at play here - the Fed&nbsp;not&nbsp;cutting rates in 2024 and BNDI&#39;s put option strategy.
According to a&nbsp;<a href="https://privatebank.jpmorgan.com/nam/en/insights/latest-and-featured/outlook#:~:text=As%20we%20head%20into%202024,becoming%20more%20accessible%20to%20investors">recent report</a>&nbsp;shared with JPMorgan&#39;s private banking clients, Wall Street is assuming a +12% increase in bond prices per -1% cut in interest rates. Of course, these are all assumptions and nothing is guaranteed.
If the Fed does&nbsp;not&nbsp;cut interest rates in 2024 and instead holds steady throughout the year, BNDI would likely trade sideways - forcing investors to depend on the Fund&#39;s put option strategy and the existing yield of its underlying investments to generate returns for their portfolios.
If you&#39;re an income-focused investor, this outcome might not be a bad scenario for you. If you&#39;re looking for both price appreciation&nbsp;and&nbsp;yield, this outcome would be disappointing.
The second risk factor is their put option strategy - leaving the fund to be on the hook for paying out against the option contracts they&#39;ve sold. Considering the Fund managers&#39; backgrounds in options-based ETFs, this is something I&#39;m not worried about. This is the same leadership team successfully executing upon both the (<a href="https://www.benzinga.com/quote/SPYI">SPYI</a>) and (<a href="https://www.benzinga.com/quote/CSHI">CSHI</a>) ETFs - one of the main reasons I&#39;m interested in this &quot;hidden gem&quot; ETF in the first place.
Statistically speaking, this put option strategy going sour would be a Black Swan event of sorts. To learn more about this put option strategy, feel free to <a href="https://www.benzinga.com/23/09/34870903/cshi-the-options-based-cash-alternative-everyone-needs-to-know-about-right-now">read&nbsp;this analysis&nbsp;on CSHI</a> which uses a similar, but slightly more conservative, strategy.
<h3>In Summary</h3>
2022 and 2023 were quite hectic for the bond market as investors were forced to continually discount the price of bonds to offset increasing interest rates. However, 2024 is shaping up to be a year that could catalyze both price appreciation while locking in heightened rates.
The Neos Enhanced Income Aggregate Bond ETF is how I plan to play this move - not only will I be experiencing possible price appreciation given their fund&#39;s underlying assets with heightened rates, but I&#39;ll also be earning +2.2% more in income given their put option strategy while taking on very little additional risk.
</div>
This article is from an external contributor. It does not represent Benzinga&#39;s reporting and has not been edited for content or accuracy.

BNDI: 2024's Hidden Gem Bond ETF That Produces 2% Additional Income While Maintaining A Similar Risk Profile

Russia launched an unprecedented aerial attack on Ukraine, firing 122 missiles and deploying numerous drones, resulting in the tragic death of <a href="https://www.benzinga.com/topic/russia-ukraine-war">at least 22 civilians</a>. 
Ukrainian officials have <a href="https://www.cbsnews.com/news/ukraine-russia-most-massive-aerial-attack/">described</a> it as the most extensive aerial barrage since Russia&#8217;s full-scale invasion in February 2022.
The Ukrainian air force claims to have intercepted most of the ballistic and cruise missiles, showcasing the country&#8217;s defense capabilities in the face of the relentless assault. 
See Also: <a href="https://www.benzinga.com/news/23/12/36374438/trump-putin-friendship-fiona-hill-reveals-putin-has-trumps-number-and-still-views-him-as-an-asset">Trump-Putin Friendship? Fiona Hill Reveals Putin &#8216;Has Trump&#8217;s Number&#8217; And Still Views Him &#8216;As An Asset&#8217;</a>
President Volodymyr Zelenskyy highlighted the diverse array of weapons used by Russia, including ballistic and cruise missiles, underlining the severity of the attack.
Notably, this marks a significant escalation compared to previous assaults, with the Ukrainian Air Force reporting that the last major attack involved 96 missiles in November 2022. The severity of the current situation raises concerns about the potential economic impact on global markets.
Ukrainian Air Force spokesman Yurii Ihnat noted that Russia seemingly utilized all available weaponry in this latest assault. As the conflict intensifies, investors are likely to turn their attention to traditional safe-haven assets (i.e., gold and government bonds). They&#8217;re also closely monitoring the performance of defense and energy stocks:
<ul>
<li>The SPDR Gold Trust ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>) </li>
<li>The iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)</li>
<li>The iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) </li>
<li>The SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) </li>
<li>The iShares U.S. Aerospace &amp; Defense ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ITA#NYSE">ITA</a>) </li>
<li>And the Energy Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLE#NYSE">XLE</a>) </li>
</ul>
The unfolding geopolitical situation underscores the inherent uncertainties in the market. Investors are grappling with the potential consequences of heightened hostilities between Russia and Ukraine. Market participants are advised to stay vigilant and responsive to evolving geopolitical developments.
Now Read: <a href="https://www.benzinga.com/news/23/12/36380487/experts-warn-russia-china-forming-military-alliance-to-counter-us-dominance-would-present-the-united">Experts Warn Russia, China Forming Military Alliance &#8216;Would Present The United States With A Threat Unlike Any It Has Confronted&#8217;</a>

Asia

Eurozone

Global

iShares Dow Jones US Aerospace & Defense Index Fund

Russia's Biggest Ukrainian Attack To Date: Unpacking Latest  Missile, Drone Salvo

For the first quarter of 2024, JPMorgan Chase &amp; Co (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JPM#NYSE">JPM</a>) is for overweight U.S. equity, Japanese equity, U.S. Treasury and high-yield corporate debt. The company said &#8220;cash returns are <a href="https://www.benzinga.com/markets/equities/23/11/35614060/warren-buffett-led-berkshire-hathways-ginormous-157b-cash-pile-is-nearing-levels-held-by-one-of-">set to fall</a>&#8221; and the U.S. stock market would &#8220;likely see the S&amp;P 500 test the 5,000 l<a href="https://www.benzinga.com/news/23/12/36229445/amazon-and-alphabet-top-picks-for-2024-jpmorgan-bets-on-continued-mega-cap-tech-rally">evel in 2024</a>.&#8221;
Read: <a href="https://www.benzinga.com/economics/23/12/36069647/2024-outlook-put-pause-pivot">2024 Outlook: Put, Pause, Pivot</a>
John Bilton, head of Global Multi-Asset Strategy at JPMorgan, and his team <a href="https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/portfolio-insights/pi-gaav.pdf">shared</a> insights from the Multi-Asset Solutions Strategy Summit they had recently.
&#8220;We see positive U.S. stock performance broadening beyond tech as an improving U.S. inventory cycle boosts cyclical sectors,&#8221; said Bilton. &#8220;Japanese stocks remain attractive, given rerating potential driven by corporate governance reforms.&#8221;
Here&#8217;s a quick look at their perspective on each asset class and few trading ideas around them (added by author):
<h2 class="wp-block-heading">Equity</h2>
JPMorgan is overweight on U.S., U.K. and Japanese equity, and underweight on European equity and Emerging Markets (ex-China).
<ul>
<li>U.S.: Expectations for an earnings growth estimate of 7% into the next year. Lower rates to provide support to stock multiples. Cash generation potential in U.S. equity. Equities outlook is also improving as the earnings downgrade cycle appears to be bottoming. The SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), the iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>) and the Vanguard 500 Index Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>) are popular funds to gain exposure to broad-market U.S. equity.</li>
<li>U.K.: U.K. equity is cheap and supported by valuations and flows. It is a defensive market; with a positive gearing towards commodities. The iShares MSCI United Kingdom ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWU#NYSE">EWU</a>) is a popular U.K. equity tracking ETF.</li>
<li>Japan: Japanese stocks remain attractive. There&#8217;s rerating potential, given improving nominal growth in the country and scope for valuation expansion. The corporate governance reforms mandated by the Tokyo Stock Exchange should support shareholder returns and drive up ROE. The iShares MSCI Japan ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWJ#NYSE">EWJ</a>) offers exposure to Japanese equity.</li>
<li>Europe: European growth is expected to remain sluggish going into 2024. </li>
<li>EM: Emerging market equities, though cheap, lack clear catalysts for a rebound. </li>
</ul>
<h2 class="wp-block-heading">Fixed-Income</h2>
From the fixed-income space, JPMorgan is overweight U.S. Treasury and high-yield corporate. It is underweight EMD hard currency.
<ul>
<li>The prospect of rate cuts in 2024 supports a duration overweight position. Yields may begin to fall steadily as rate cuts begin.</li>
<li>Investors should prefer U.S. Treasuries to other G4 countries. Yields in the low 4s should be attractive ahead of Fed rate cuts. JPMorgan sees potential returns of 10%–20% if growth disappoints. The iShares 20+ Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NYSE">TLT</a>), the iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) and the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIL#NYSE">BIL</a>) are popular ways to get exposure to U.S. Treasury.</li>
<li>Overweight corporate high-yield debt as there&#8217;s modest scope for spread tightening. Fundamentals appear supportive with limited rise in defaults. Overall, the carry looks attractive. The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and the iShares Broad USD High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USHY#NYSE">USHY</a>) are two of the largest ETFs providing exposure to high-yield corporate debt in the U.S.</li>
</ul>
<h2 class="wp-block-heading">Currency &amp; Cash</h2>
The US dollar, as tracked by the Invesco DB US Dollar Index Bullish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>), appears set to weaken in 2024. JPMorgan sees a soft landing for the greenback as growth broadens out globally.
Rate cuts possibility in the U.S. further supports a US dollar underweight position.
Bilton is also underweight on cash. &#8220;Cash returns set to fall as cutting cycle begins; long-term USD rates likely nearer 2.5% than 5.5%,&#8221; he laid out.
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35837453/goldman-sachs-2024-equity-outlook-winning-stocks-and-sectors-to-watch">Goldman Sachs&#8217; 2024 Equity Outlook: Winning Stocks And Sectors To Watch</a>

USHY

S&P 500 Likely To 'Test The 5,000 Level': JP Morgan On Where To Allocate In 2024

BlackRock Inc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BLK#NYSE">BLK</a>) doesn&#8217;t anticipate rate cuts until the second half of 2024. The shape of the yield curve and the trajectory of growth will be key drivers of returns.
Gargi Pal Chaudhuri, head of iShares Investment Strategy Americas at BlackRock, <a href="https://www.ishares.com/us/insights/year-ahead-outlook-2024#macro">shared</a> her view on the outlook. 
&#8220;The shape of the yield curve is now signaling that it's time to consider allocating out of cash,&#8221; noted Chaudhuri. She believed that sitting in cash in 2024 would mean missing out on bond and equity market returns.
Chaudhuri identified opportunities to deploy cash selectively across asset classes:
<ul>
<li>Fixed income: pairing intermediate duration core holdings with differentiated income-seeking exposures.</li>
<li>Equities: adding downside protection in core exposures while taking targeted risk in loveable laggards.</li>
</ul>
An interesting fact that came to light from the report was that in the previous five hiking cycles since 1990, the Fed paused an average of 10 months between its last hike and its first cut.&nbsp;On average, stock and bond returns have been higher during the pause period than in easing periods immediately following the first cut.
Frequent portfolio adjustments may be needed in 2024, owing to:
<ul>
<li>Geopolitical risks</li>
<li>Election cycles</li>
<li>Worsening U.S. fiscal backdrop, and</li>
<li>Shifting central bank narratives</li>
</ul>
For equity allocations, managing macro risks in a slowing growth backdrop will be key.&nbsp;
&#8220;In a shifting macro environment, remaining invested can be paramount, but adding downside resiliency to core equity holdings could make sense for many investors,&#8221; said Chaudhuri. 
Using ETFs as investment vehicles could be a good strategy in such a macro-environment, per BlackRock, as these efficiently adjust to rapidly changing realities.
For reference, SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>), Vanguard Total Stock Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTI#NYSE">VTI</a>) and Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>) are the most popular and biggest U.S. equity tracking ETFs in the U.S.
The most popular intermediate-term bond ETFs are Vanguard Intermediate-Term Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VCIT#NYSE">VCIT</a>), iShares 7-10 Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NYSE">IEF</a>) and Vanguard Intermediate-Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGIT#NYSE">VGIT</a>).
Photo: Shutterstock

Personal Finance

VCIT

Traders May Need Frequent Portfolio Adjustments In 2024: BlackRock

200개 이상의 중앙은행과 외국 기관들이 뉴욕 연은에서 미국 국채를 대규모로 인출했다. 이는 미국 달러의 안정성에 대한 잠재적 우려를 시사한다.
무슨 일 있었나: 뉴욕 연은의 미국 국채 및 기타 자산 보관 잔고가 크게 감소했다. 보유량은 지난주 170억 달러 감소했으며, 3월 말 이후 480억 달러 급감했다. <a href="https://fortune.com/2025/06/18/central-banks-have-dumped-48-billion-in-treasuries-as-foreign-wealth-officials-divorce-the-dollar/" target="_blank" rel="noopener">포춘에서 보도한 바에 따르면</a> 이는 도널드 트럼프 대통령의 관세 조치로 촉발된 무역 긴장 고조 시기와 일치한다.
뱅크오브아메리카의 매니징 디렉터이자 미국 금리 전략가인 메건 스위버와 동료 전략가 케이티 크레이그는 외국 민간 투자자들의 국채 시장 철수에 대해 심각한 우려를 표명했다. 스위버와 크레이그는 "이러한 감소는 이례적&#8221;이라고 언급했다.
일반적으로 미국 채권 판매로 발생한 현금은 뉴욕 연은의 역환매 시설에 예치되며, 이는 국채를 담보로 교환된다. 그러나 추세는 최근 역전되어 3월 말 이후 외국인의 해당 시설 참여 규모가 15억 달러 감소했다. 이는 연방준비은행에 보관된 외국인의 미국 자산이 약 630억 달러 감소했다는 점을 시사한다.
스위버는 포춘에 "우리는 향후 몇 년간 적자가 계속 증가할 것으로 보고 있으며, 우리가 직면한 문제는 &#8216;누가 그 높은 공급 수준을 지원할 것인가&#8217;이다"라고 말했다.
아폴로 글로벌 매니지먼트의 수석 경제학자인 토르스텐 슬록에 따르면 외국 투자자는 미국 국채 시장의 약 30%를 차지한다. 이들의 참여 감소는 재무부가 투자자를 유치하기 위해 더 높은 금리를 제공해야 할 수 있어 경제 전반의 금리에 영향을 미칠 수 있다고 포춘은 보도했다.
왜 중요한가: 중앙은행과 외국 기관의 미국 국채 매각은 미국 달러의 안정성과 글로벌 경제에 미치는 잠재적 영향에 대한 우려를 가중시키고 있다. 이 추세는 <a href="https://www.benzinga.com/markets/treasuries/25/06/45960637/treasury-yields-near-5-after-soft-foreign-demand-a-red-flag-for-stocks" target="_blank" rel="noopener">국채 수익률 상승</a>과 동반되었으며, 이는 외국 수요의 약화를 시사해 상황을 더욱 악화시킬 수 있다.
이러한 동향은 미국 달러와 국채 수익률 간의 역사적 관계 고려 시 특히 주목할 만하다. 그러나 이 패턴은 2025년 4월부터 <a href="https://www.benzinga.com/markets/treasuries/25/06/45739830/us-dollar-decouples-with-10-year-treasuries-as-trade-tensions-change-long-standing-relationships-between-asset-classes" target="_blank" rel="noopener">중요한 변동</a>을 보이며, 글로벌 투자자들의 미국 자산에 대한 신뢰 변화 가능성을 시사하고 있다.
미국 달러의 세계 준비 통화 지위와 미국 정부의 재정 의무 이행 능력에 대한 신뢰가 흔들리면서, 미국은 차입 비용 증가를 겪을 수 있으며, 이는 경제의 다양한 분야에 영향을 미칠 수 있다.
올해 들어, iShares 20+ Year Treasury Bond ETF(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)는 1.05% 하락했으며, iShares 7-10 Year Treasury Bond ETF(NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/IEF#NASDAQ">IEF</a>)는 2.21% 상승했다.
이미지 출처: Shutterstock
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iShares 7-10 Year Treasury Bond ETF

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