(Bloomberg) -- Some big bond investors say don’t be deceived by the Treasury market’s torrid rally Wednesday. 

The hawkish signals still coming out of the Federal Reserve are what matters. The rest is noise. 

The world’s biggest bond market has been whipsawed in recent days on the back of a debt crisis gripping the UK. Benchmark 10-year Treasuries tumbled by the most since the Covid crash on Monday, only to rebound just as quickly on Wednesday when the Bank of England stepped in to buy gilts and stabilize the market.

But the turmoil has done little to change the force that has pushed the Treasury market this year to its deepest losses in decades: The Fed’s resolve to keep raising interest rates until inflation is reined in.

“You can see the footprints of the Gilt market all over the US Treasury market in the past week,” said Bob Miller, head of Americas fundamental fixed income at BlackRock Inc., the world’s biggest asset manager. “The signal value from the price action in the US bond market is being significantly degraded by non-domestic factors.”

After the 10-year yield breached 4% for the first time since 2010 early on Wednesday, the market abruptly changed course as the Bank of England moved in. 

The yields on some UK government bonds tumbled by more than a full percentage point, pulling those on US bonds down along with them. Benchmark 10-year Treasury yields slid as much as 25 basis points to 3.69% before paring the drop, erasing almost all of the previous two-day rise. Even so, it remains up from 3.53% a week earlier, when the Fed enacted its third straight three-quarter point rate hike.

The massive swings across the Treasury curve have driven a measure of implied volatility back to levels seen in March 2020, when markets gyrated wildly as the pandemic spread in the US. This week’s moves may also have been exaggerated by the close of the quarter, which is typically a time of thin liquidity as money managers adjust their portfolios. 

“I don’t think what we have seen today in the bond market reflects a change in the Fed’s approach,” said Steve Boothe, head of the investment grade fixed-income team and a portfolio manager at T. Rowe Price. “Rate volatility at the moment is clearly being driven by what is going on globally.”

A number of Fed officials in recent days have affirmed the need for the central bank to tighten policy rates well beyond the current band of 3% to 3.25%, which would likely drag the bond market down further. Speaking Wednesday, Atlanta Fed President Raphael Bostic said inflation is still too high and that he backs raising rates by another 1.25 percentage points by the end of this year.

BlackRock’s Miller said the Treasury rally on Wednesday and futures trading reflecting speculation that the Fed’s rate will peak below 4.5% are just “noise,” compounded in part by poor liquidity.

“At a high level, the Fed still has a ways to go,” he said. “I wouldn’t get caught up in the short-term price action. There is a lot of chatter in the market as to whether there is enough stress that the Fed backs off. But it comes from outside the US and it is beyond the Fed’s control.”  

Unless an international crisis were to dramatically upend the domestic economy, the Fed isn’t expected to change course, given its focus on taming an inflation surge it once considered temporary. David Kelly, chief global strategist at JPMorgan Asset Management, said he doesn’t expect the Fed to pull back on its hawkish tone anytime soon. 

“The Fed is keenly aware that any hint of a dovish pivot would result in long term rates coming down and that would undo their efforts at tightening financial conditions,” he said. 

Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, said he expects a similar resolve. “Unless something breaks in the US market, the Fed sounds very committed to finishing the work they started in 2022,” he said. 

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