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‘Follow the Fed’ Rally May Soon Fizzle Across Bond Markets

  • Credit spreads, Treasury yields trade sideways after dropping
  • ‘Slight misunderstanding’ between markets and the Fed: Samana
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A breakneck rally across bond markets may slow as traders come to grips with the notion that the Federal Reserve’s support isn’t unconditional.

After a torrid rally sparked by the Fed’s announcement in March that it would begin buying corporate debt, investment-grade bonds have stalled near record levels. A similar pattern holds true for high-yield markets, where spreads are broadly trading sideways after the asset class’s best returns in a decade brought them close to pre-pandemic levels. And the central bank’s oft-repeated commitment to keeping interest rates low have locked benchmark Treasury yields into an unrelenting range close to historic lows.