Springtime For Treasury Bonds

Investors take note. Economist Lacy H. Hunt of HSBC Holdings Inc. observes that the U.S. Treasury bond market has exhibited a distinct seasonal pattern around this time of year for more than a decade.

From 1984 through 1994, 30-year Treasury yields tended to move higher from the end of March through mid-May and then to move lower through the end of June. On average, they rose 18 basis points in the first half of the second quarter and fell 22 basis points in the second half.

The record is not quite perfect. But in three of the four years when yields fell through mid-May, they fell even more through June. And in each of the three years when yields rose in the second half of the quarter, they rose significantly less than in the first half.

Hunt thinks the seasonal pattern may be related to the mid-May refunding of debt by the Treasury. Or it may reflect the draining of liquidity from the market as taxes are paid in April and then the restoration of liquidity as the Treasury gradually recirculates the funds back into the economy. Whatever the reason, however, he feels the seasonal pattern is another reason to believe that the bond market rally will continue through June.

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