Lowenthal Bets on the Rebound of U.S. Treasury Bond

Alan Lowenthal, the U.S. representative for California's 47th congressional district since 2013, disclosed he made a bet on the rebound in the U.S. bonds earlier this month. Lowenthal invested a value between $100,000 to $250,000 in U.S. Treasury Bonds on November 08. 

A yield on the U.S. 10-year bond was trading near 14-year highs on November 8, just two days before a softer-than-expected inflation print sent stock and bonds sharply higher. The 10-year yield, which moves inversely compared to a 10-year bond, closed at 4.13% on November 08 before staging a massive decline just two days later, when it closed at 3.818%.

On November 10, the U.S. inflation figures for October were released, which showed that inflation increased less than expected, fueling hopes that the Fed may pivot from its ultra-aggressive rate-hiking policy. Investors are increasingly hoping that the Fed will slow down the pace of rate hikes.

When interest rates rise, both bond and stock prices go down. Hence, a slowdown in the pace of rate hikes will boost bond prices. One could ask what will help the Fed to decide when to slow down. Well, Fed Chair Jerome Powell said multiple times that the Fed’s approach is data-dependent, with a high focus on inflation and jobs data.

And again, it was exactly the softer-than-expected Consumer Price Index (CPI) figures that sent bonds and stocks sharply higher on November 10. Hence, Lowenthal betting on the rise in bonds just two days before the CPI print was out will surely raise many eyebrows. 

As of November 25, the U.S. 10-year bond is yielding about 3.7%, the lowest since the first week of October. Falling yields are helping stocks trade higher with the U.S. benchmark index S&P 500 trading above 4000.