Odd Lots Lots More on the Global Selloff in Government Bonds
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Jan 10, 2025 In this episode, Jay Barry, head of global rates strategy at JPMorgan Securities, dives into the pressing selloff in government bonds worldwide. He explains how US, UK, and Japan bond yields are hitting multi-year highs. Jay unpacks the complexities of term premiums and discusses the impact of recent Federal Reserve policies on market dynamics. He also shares insights on how various economic indicators and fiscal strategies influence investor sentiments, while offering forecasts on the future of the treasury market.
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Bond Yield Drivers
- The rise in long-end bond yields is due partly to a higher term premium and partly to a higher estimated terminal rate.
- This balanced view acknowledges the complexity of bond market dynamics.
Trump Win and Bond Market
- Market nervousness about a potential Trump win was reflected in increased put options on long-term bonds (TLT).
- This suggests a secular nervousness in the long end of the bond market.
Economic Outlook Shift
- The bond market's shift since September reflects changing economic expectations.
- Initial signs of potential recession, like rising unemployment, have been countered by other economic indicators.