What Are The True Fundamentals Behind The Treasury Bond ‘Rout’?

SectorFinancial Markets
CountryMiddle east

The biggest macro-finance story so far this year is the “surge” in Treasury bond yields. (It is described as a “rout” when speaking about Treasury bond prices… A rise in yield means a fall in price, a loss for bond-holders.) Since January 1, the yield on the 10-year bond has almost doubled. Treasury Yields Jan 2021-April 2021 Chart by author The 1st quarter was the worst in decades for holders of long-dated Treasurys. Prices were down about 13%.

  Treasury Bond Prices Jan 1 2021-April 5 2021 Chart by author “Safe haven” assets like long-dated Treasury bonds are not supposed to lose such a large chunk of the principal so quickly. However, the significance of this “surge/rout” goes beyond the question of losses to investors holding this particular asset class. The Wall Street Journal has called the 10-year Treasury yield the “most important price in the global economy.” It is the benchmark for the cost of quality-credit everywhere.  “Long-dated German yields rise to highest in a year, tracking U.S. Treasuries” – Reuters Headline “The global government bond sell-off deepened with ...read more...