Why the Long End Bid?

per IFR News “UST’s are coming into the session higher and flatter mainly courtesy of strong long-end buying of duration by Asian/Japanese liability-driven investors (insurance and pension funds) seeking to add duration assets to help fund their future liability needs. This group has been somewhat conspicuously absent of late thought to be waiting for more attractive yield levels before entering. Apparently not, with the recent +20 bps pullback a sufficient enticement”

Todays Economic releases were ugly and outside of Empire ,were for March thus data going to get worse .Slow economic growth=slow inflation so possibly the Bid in long end is pricing in the real prospect of much, much lower inflation.Recall that last weeks CPI data m/m was negative! Today’s EIA oil storage numbers reported the largest build ever in oil + Products and the lowest 4 week average for gasoline demand,Lower oil=higher Bonds if we believe in the Deflation narrative.

lastly talk of Yield curve control heating up as the Credit Suisse Guru Zoltan Pozsar,makes mention in his latest note of capping short term bill yields.Also NY Fed wrote up a paper referencing the time the Fed did this during WW II link here .https://libertystreeteconomics.newyorkfed.org/2020/04/how-the-fed-managed-the-treasury-yield-curve-in-the-1940s.html

I need to research a bit more on this topic but it could be a reason for bid in long end as well.

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