Bond Market Swinging Between Rallies, Routs Dizzies Traders
- A challenge as war, rising rates spurs upsurge in volatility
- Haven bid fades as inflation concerns shift back to forefront
The surging volatility in the world’s biggest bond market is challenging traders trying to play both tighter global monetary policy and a war-induced commodity price shock that’s raising the specter of 1970s-style stagflation.
Treasuries rallied sharply after the Russian invasion of Ukraine amid a rush into the safest assets, spurring a race to buy insurance against another unexpected rise in prices. Then last week the pendulum swung back just as swiftly, with 2-year yields surging to more than two-year highs as a steep jump in consumer prices underscored the case for the interest-rate hikes the Federal Reserve is almost certain to begin on Wednesday. Renewed selling pressure on Monday propelled the 10-year yield up 11 basis points to 2.10%, its highest level since July 2019, while the five-year note climbed above 2% for the first time in three years.