Investors have invested heavily in short-term U.S. government bonds in an effort to get through the instabilities created by an explosion in longer-term yields, as reported by Lindsay Rosner of Goldman Sachs. At this week's sale of 52-week Treasury bills at a 5.19% rate, investor demand was 3.2 times higher than expected, a record high for the year, Rosner said. "They're expressing that they are now receiving considerably more yield in the very initial part of the curve in government bonds," Rosner stated in a telephone interview with CNBC, referring to 1-year T-bills.
Investors have been flooding into short-term U.S. government bonds to make the most of the increased yields, Lindsay Rosner, head of multi-sector investing at Goldman Sachs asset and wealth management, revealed. The auction of 52-week Treasury bills this week saw an unparalleled rate of 5.19%, with a demand that was 3.2 times higher than the average. Rosner remarked that people have moved to plump for government paper at the 1-year mark, as it provides more yield. This is an important move for big players and affluent investors in response to the sharp rise in long-term rates, which have been climbing without interruption and touched the highest mark for 16 years on Friday due to the powerful September jobs report. According to Bloomberg, the amount of money invested in new Treasury bills over the last quarter was over $1 trillion.
The harshness of the winter was quite surprising.
The winter was shockingly severe.
Rosner believes the playbook takes advantage of the idea that low interest rates will last longer than was previously thought of. This means that 10-year Treasuries should offer higher yields in the coming year and investors could potentially receive a double-digit yield in investments such as corporate bonds. However, fixed-income products such as investment-grade and high-yield bonds have yet to adjust their pricing in regard to the rate assumptions. Therefore, currently these products are not a good choice, but may provide potential opportunities in the future. Consequently, professional investors are looking to decrease the duration of their portfolios and are turning to treasury bills as an option. This is the case with BlackRock and Emons.
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