Bond Traders Get the Fed Wrong Again
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Bonds markets are reeling from the risk that the Fed won’t cut interest rates as much as expected.
The 10-year Treasury yield rose above 4.2% for the first time since July, setting off a surge in borrowing costs from Australia to Germany. A gauge of expected debt-market volatility, called the Ice BofA MOVE index, is now around its highest of the year.
Once again, it looks like bond investors got carried away with a rally fueled by optimistic bets for easier monetary policy — only to be hit with the reality that change may not happen as quickly as they would like. It’s a pattern that played out on repeat for the past two years. Here’s some of the reasons behind the bond market selloff this time around: