Brian Chappatta, Columnist

Why a Treasuries Bear Market May Not Live Up to the Hype

A growing chorus of experts see losses ahead, but there are good arguments on the other side.

June 7, 2018 at 9:02 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Provide news feedback or report an error

Site feedback:

Take our Survey

This article is for subscribers only.

This article is part of the June 11, 2018 issue of Markets.

U.S. Treasuries provide the closest thing on the planet to the risk-free rate of return, a crucial element in financial theory used to value a wide swath of global assets. After all, they make up the largest and most liquid bond market, the dollar is the reserve currency of the world, and top ratings from most major credit agencies signal virtually no risk of a default.

Lately, though, the trend among many Wall Street practitioners is to outdo one another with grandiose statements about how much risk is actually embedded within the $14.9 trillion Treasury market. By their logic, after years of rock-bottom interest rates as the global economy recovered from the post-crisis recession, rates are destined to head higher—and in a hurry. The most common shorthand for this doomsday scenario: the bond bear market.