Wallstreet Breakfast:
Wild swings continue to envelop the bond market, with two notable names in the industry making fresh calls on the sector. The pairs' statements also continue to come hours apart from each other, as they did on Aug. 3, when they both became growling bond bears and added to the pressure on long-term Treasuries. Since then, the yield on the 10-year Treasury (US10Y) jumped nearly an entire percentage point, climbing from 4.07% to top 5% yesterday, while the 30-year Treasury (US30Y) went from 4.16% to a high of 5.15% in just under two months.
Old tweets
Bill Ackman: "If long-term inflation is 3% instead of 2% and history holds, then we could see the 30-year T yield = 3% + 0.5% (the real rate) + 2% (term premium) or 5.5%, and it can happen soon. There are many times in history where the bond market reprices the long end of the curve in a matter of weeks, and this seems like one of those times."
Bill Gross: "10 yr yields? Overall bearish"
New outlook
Bill Ackman: "We covered our bond short. There is too much risk in the world to remain short bonds at current long-term rates. The economy is slowing faster than recent data suggests."
Bill Gross: "Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in 4th quarter. On bonds. Invest in the curve. Various combinations 2/10, 2/5. Should go positive before year end. I’m buying SFR h5 (SOFR futures). 'Higher for longer' is yesterday's mantra."
Remember, the last time rates were this high was pre-2008, and it seems like the Bills now feel that the rout in Treasuries seen in the aftermath of the COVID pandemic has gone too far. Markets appeared to have adopted that view on Monday, with the yield on the US10Y sinking 20 bps to a low of 4.80%, but it is too soon to tell if that sentiment will hold. Term premium is the word on Wall Street, as well as regular investors that are looking at related bond ETFs, but there are many factors at play that can have impacts on benchmark yields. Among them are forecasts and actual economic data, debt sustainability, and geopolitical developments, with eyes tightly kept on the Federal Reserve and words from the officials on financial conditions.
Wild swings continue to envelop the bond market, with two notable names in the industry making fresh calls on the sector. The pairs' statements also continue to come hours apart from each other, as they did on Aug. 3, when they both became growling bond bears and added to the pressure on long-term Treasuries. Since then, the yield on the 10-year Treasury (US10Y) jumped nearly an entire percentage point, climbing from 4.07% to top 5% yesterday, while the 30-year Treasury (US30Y) went from 4.16% to a high of 5.15% in just under two months.
Old tweets
Bill Ackman: "If long-term inflation is 3% instead of 2% and history holds, then we could see the 30-year T yield = 3% + 0.5% (the real rate) + 2% (term premium) or 5.5%, and it can happen soon. There are many times in history where the bond market reprices the long end of the curve in a matter of weeks, and this seems like one of those times."
Bill Gross: "10 yr yields? Overall bearish"
New outlook
Bill Ackman: "We covered our bond short. There is too much risk in the world to remain short bonds at current long-term rates. The economy is slowing faster than recent data suggests."
Bill Gross: "Regional bank carnage and recent rise in auto delinquencies to long-term historical highs indicate U.S. economy slowing significantly. Recession in 4th quarter. On bonds. Invest in the curve. Various combinations 2/10, 2/5. Should go positive before year end. I’m buying SFR h5 (SOFR futures). 'Higher for longer' is yesterday's mantra."
Remember, the last time rates were this high was pre-2008, and it seems like the Bills now feel that the rout in Treasuries seen in the aftermath of the COVID pandemic has gone too far. Markets appeared to have adopted that view on Monday, with the yield on the US10Y sinking 20 bps to a low of 4.80%, but it is too soon to tell if that sentiment will hold. Term premium is the word on Wall Street, as well as regular investors that are looking at related bond ETFs, but there are many factors at play that can have impacts on benchmark yields. Among them are forecasts and actual economic data, debt sustainability, and geopolitical developments, with eyes tightly kept on the Federal Reserve and words from the officials on financial conditions.
