Retail traders have fallen in love with bonds
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Retail traders have fallen in love with bonds: Morning Brief
of equities in February.
This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Tuesday, March 7, 2023
Today's newsletter is by Julie Hyman, anchor and correspondent at Yahoo Finance. Follow Julie on Twitter @juleshyman. Read this and more market news on the go with the .
When Fed Chair Jay Powell settles in for his semi-annual testimony to the Senate Banking Committee today, investors will be looking for confirmation that the central bank is going to keep raising interest rates for the next several meetings to fight inflation.
Besides the ongoing debate about whether the Fed’s actions are going to send the U.S. economy into recession and stocks into a tailspin, there’s been one other important side effect: the bond market is the hottest it’s been in years.
That’s newly true not just for institutional investors, but for retail traders as well. That’s because online trading of Treasuries is accessible at a critical mass for the first time with rates at these levels. It's never been easier to buy, be it directly via the Treasury Department, from the discount brokerages, or through ETFs.
The repricing of rate expectations this year has sent yields on many Treasury notes and bonds to their highest in 15 years, with the 2-year, 10-year (TNX), and 30-year all yielding around 4%.
It’s been a huge shift for fixed income.
Besides institutional investors salivating over government and corporate debt, retail traders are so keen they've repeatedly crashed the TreasuryDirect website, which provides a conduit to Treasuries and I bonds. (The latter is an inflation-protected instrument that has both a fixed rate and one that changes with inflation).
“For pretty much the entire decade, leading up to this year, when people asked about retail and fixed income, I could just simply say, ‘no one really cares.’ The past year, that has significantly changed,” Shawn Cruz, Head Trading Strategist at TD Ameritrade, told Yahoo Finance.
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