Bond sellers offer a reminder that they aren’t going anywhere just yet
Hedge funds. Block trades. Liquidation. Risk management. It’s all an interesting story but a passable one in the grand scheme of things. Higher yields on the other hand, that is one that is tough to ignore since the start of the new year.
10-year Treasury yields are back up to above 1.75%, going back to pre-pandemic levels and while it may seem like the hard part is just beginning i.e. climb towards 2%, odds are the market is still willing to chase that given the Fed’s approach.
Sure, there’s still a need to observe higher inflation numbers and hotter economic data in the next few months. But for now, the market is still running with the same view over the past few weeks and that hasn’t changed post-FOMC meeting this month.
With the short-end of the curve still going nowhere, it plays exactly to the Fed’s liking.