- The "bondtrarians at the gate" have created a plunge in prices that can take it's place among the biggest, and most memorable ,of all time, according to BofA Securities.
- In a note out today, BofA's Data Analytics team says the decline in 10-year Treasury prices rivals the GOATs (greatest of all time).
- The 10-year price return is -27.7% in what they call the Vaccine Bear Market. That's more of a drop than the Tech Bubble -15.2% and the Orange County/Mexico -22.9% selloffs and not far from the Taper Tantrum -37.1%. (See chart from BofA below.)
- Rates are edging back this morning. The 10-year yield is down 10 basis points to 1.48%. But it's still up about 14 basis points for the week.
- The 10-year spiked above 1.6% briefly yesterday after an auction of 5-year and 7-year Treasuries that saw very weak take-up for 7-years.
- We think "this is another example of a lack of market depth in the new market structure causing prices to move violently in response to a change in sentiment," UBS strategists led by Michael Cloherty wrote in a note today. "That suggests this is not the last gap the Treasury market will see."
- The record-low demand flattened the yield curve as 5-years spiked, hitting bets on a steeper yield curve, which in turn led to unwinding of $50B in 10-year positions, Bloomberg reports.
- The 5-year yield is off 1 basis point to 0.79% this morning. It's added about 20 basis points for the week.
- Looking globally at bond selloffs, BofA says that since Aug 4th, the annualized price returns are: +10-year U.S. government bonds -29%, Australia -19%, and "they do yield curve control!", UK -16%, Canada -10%.
- "Watch bank stocks 'tell' bond rout (is) hurting liquidity & growth expectations," BofA says.
- Among bond ETFs (NYSEARCA:TBT) -2.1%, (NASDAQ:TLT) +1%, (NYSEARCA:TIP) flat, (NASDAQ:IEF) +0.4%, (NASDAQ:BND) +1%, (NASDAQ:VGLT) +0.9%, (NASDAQ:IEI) +0.1%
- In stocks, (NYSEARCA:SPY) -0.2% (NASDAQ:QQQ) flat
- Strategists are debating what 10-year level could trigger a riot in equities, a selloff that could spook the Fed into action.