Wall Street Faces Fresh Pain When Key Bond Distortion Fades Out
- Fed’s balance-sheet unwind could ramp up longer-dated premiums
- Investors see financial-stability risk in low rate status-quo
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The spreading global bond rout is spurring a Wall Street debate on whether investors will demand to be paid for lending to the American government like they used to.
Even with inflation at the highest in decades, traders are still getting zero compensation for buying longer-dated bonds relative to rolling over shorter-term securities, a distortion known as a negative term premium.