Odd Lots
JPMorgan's Jay Barry on the Big Selloff in Bonds
Oct 11, 2023
Jay Barry, Co-head of US interest rate strategy at JPMorgan Chase, dives into the recent turmoil in bond markets. He explains how soaring yields on US Treasuries are influenced by economic growth expectations, inflation, and the Federal Reserve's outlook. Barry discusses the complex interplay of supply and demand, and the crucial impact of term premium on investor behavior. As sentiments shift among investors, he sheds light on the awakening of bond vigilantes and what this means for the future of U.S. debt.
32:09
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Quick takeaways
- The recent bond market sell-off has been driven by positive US economic growth expectations and rising inflation, influenced by factors such as higher energy prices and Fed balance sheet reduction.
- Analyzing bond market moves requires considering multiple factors like growth and inflation expectations, Fed policy, sentiment among investors, bond issuance, deficits, and the decline of price-insensitive buyers.
Deep dives
Factors Driving the Bond Sell-Off
The recent bond market sell-off has been driven by a confluence of factors. Initially, it was influenced by positive US economic growth expectations, which increased confidence in the economy and anchored higher levels of long-term rates. Additionally, inflation expectations have been rising, particularly in the context of higher energy prices and continued Fed balance sheet reduction. While there is no clear proximate cause for the sell-off, factors such as the recent FOMC meeting, oil prices, supply dynamics, and technical aspects have all been cited. The wider market implications and the need to understand the underlying dynamics of the sell-off have become increasingly important.
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