Long dated bonds much more subject to market narratives than short duration.
QT applies upward pressure on rates.
S&p, Powell, Dalio, ackman (and others can remember which) have all said in last two months longer duration needs to be higher. US not on fiscally sustainable path.
If back end keeps moving up then this will be the UK situation from a year ago and similar to 1970s. The US government will need to define an austerity type budget (7% YoY deficit is the opposite). needs to be near balanced immediately (not pretend balanced in 10 years from now) and fed will need to buy back end of curve.
The treasury has known demand at back of curve was a problem. They have been loading up short duration issuance the last 3 months since they started rebuilding TGA and have dialed down/kept flat longer duration.
Keep an eye on USD. The big issue is going to be if it starts falling at same time as long yield rates start going up. Right now it's been strong, so the scenario I describe isn't happening yet but it can quickly change into that type of scenario.
Long dated bonds much more subject to market narratives than short duration.
QT applies upward pressure on rates.
S&p, Powell, Dalio, ackman (and others can remember which) have all said in last two months longer duration needs to be higher. US not on fiscally sustainable path.
If back end keeps moving up then this will be the UK situation from a year ago and similar to 1970s. The US government will need to define an austerity type budget (7% YoY deficit is the opposite). needs to be near balanced immediately (not pretend balanced in 10 years from now) and fed will need to buy back end of curve.
The treasury has known demand at back of curve was a problem. They have been loading up short duration issuance the last 3 months since they started rebuilding TGA and have dialed down/kept flat longer duration.
Keep an eye on USD. The big issue is going to be if it starts falling at same time as long yield rates start going up. Right now it's been strong, so the scenario I describe isn't happening yet but it can quickly change into that type of scenario.