, Columnist
There's a Bear Raid Underway in the Bond Market
The economic picture has been brightening for some time, but it is the supply outlook that truly threatens Treasuries going forward.
The bears are restless.
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Year-end trading markets can be brutal if you’re stuck in a crowded position. Take the market for U.S. Treasuries, where the trade of 2017 was to bet on a flatter yield curve. For many, that often translated into outright long positions in 20- and 30-year Treasury bonds and futures, wagering that their yields would continue to trend lower toward short-term rates.
The stellar performance of the long end of the Treasury curve despite three interest-rate increases from the Federal Reserve and a stronger economy was described by pundits as the Fed's "New Conundrum," in reference to then-Fed Chairman Alan Greenspan's remarks about a similar reaction in the bond market to central bank rate hikes in 2005.