Bond Bears Collide With Swaps Showing Low Rates

Just the hint the Federal Reserve would end debt purchases that have supported bond prices sent Treasury yields soaring last month to the highest since April, a reaction that is unwarranted if money markets are a guide.

Even as yields rose, overnight index swaps that traders use to speculate on the path of the Fed’s target interest rate for overnight loans between banks signaled that the zero to 0.25 percent range won’t increase for more than two years. In a bullish sign for bonds, Bank of America Merrill Lynch’s MOVE Index, which tracks the outlook for swings in U.S. government debt rates, shows investors don’t anticipate an increase in price swings.