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BlackRock’s fixed income chief, Rick Rieder, says the Treasury market is making history before our eyes.
Though interest rates remain low by historical measures, the sharp rise in long-term bond yields in the past few weeks has caught even the most jaundiced and experienced traders by surprise. Yields and bond prices move in opposite directions.
In a tweet on Thursday, Rieder noted an index tracking the performance of long-dated Treasurys had fallen more than 20% from peak to trough, meeting the widely accepted definition of a bear market. That drawdown was unmatched in the last four decades.
The Barclays Long Treasury Index tracks the performance of all Treasury securities with remaining maturities of 10 years and longer.
This comes after the 10-year Treasury note yield
TMUBMUSD10Y,
touched 1.75% this week, and the 30-year bond yield
TMUBMUSD30Y,
flirted with 2.50%, with both levels considered as key lines in the sand for long-dated government bonds. Bond prices move in the opposite direction of yields.
The bond market selloff over the past seven weeks initially unsettled stocks, though the Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
subsequently pushed to new all-time highs. The Nasdaq Composite
COMP,
has lagged behind as rising yields stoked a rotation away from previously highflying tech-related stocks toward more cyclical sectors expected to shine as the economy accelerates following vaccine rollouts and trillions of dollars in fiscal relief.
Treasurys remained under pressure this week as the Federal Reserve declined to intervene directly and prevent long-term yields from rising, though Fed Chairman Jerome Powell maintained his dovish stance.
Investors said the enormous uncertainty around how fast U.S. growth and inflation will bounce back thanks to unprecedented fiscal and monetary policy support was leading bondholders to demand higher yields in return for that risk.
See: The Fed is dovish but bond yields are soaring. What gives?
