It was 8:30 in the morning on Aug. 1, which meant the U.S. Labor Department’s monthly wage data had just been released.
One day earlier, the 46-year-old co-founder of NineAlpha Capital LP, a hedge fund specializing in U.S. government debt, detected signs of bearishness in the bond market after a report showed employment costs rose by the most since 2008.
Yields on 10-year Treasuries hit a three-week high, suggesting traders were bracing for evidence the long-awaited pickup in wages would materialize and provide the catalyst for the Federal Reserve to raise interest rates -- a view that Evans determined was wrong. So when his computer screen showed hourly earnings were unchanged in July, he knew exactly what to do: direct his traders to buy more Treasuries.
“We were at the edge of our seats,” Evans, the former head of U.S. government bond trading at Deutsche Bank AG and Goldman Sachs Group Inc., said in a telephone interview from his 17th floor office in downtown Manhattan.
Treasuries rallied that day, causing yields
to retreat from their earlier highs. Since then, they have fallen even
further as crises in Russia and the Middle East prompted investors to
pour into haven assets. Yields on benchmark 10-year notes dropped as low
as 2.35 percent last week, the least since June 2013, and ended at 2.42
percent.
