Gold Still Attractive As The Bond Selloff Looks Overdone

Gold Still Attractive As The Bond Selloff Looks Overdone

Government bond yields have been rising steadily for the past three months, but they went parabolic in February, surging over 31%. The yield on the 10-year Treasury touched 1. 6% last Thursday, up from 0. 9% just a couple of months ago. That's more than a two standard deviation move, suggesting the bond selloff may be overdone. Remember, bond yields rise as prices fall. Yields have jumped so much, in fact, that they're giving stocks a serious run for their money. The 10-year yield is now higher than the S&P 500 dividend yield, which may have added to the selling pressure that cost stocks close to 2. 5% yesterday. Yield on the 10-Year Treasury Now Above the S&P 500 Dividend Yield It's important to recognize the reasons why yields are rising. In an email to clients on Friday, Evercore ISI analysts explained that the move is "associated with the higher inflation expectations" and that investors are pricing in "a positive economic skew." In other words, as expectations of a strong economic recovery mount“”assisted by trillions in fiscal stimulus, loose monetary policy forever and hopes of herd immunity by summer“”so do expectations for higher inflation. Despite what Federal Reserve Chair Jerome