The current Treasury bear market has been impressive, and unfortunately for the bond bulls, there is no valuation reason for it to stop. For example, the 5-year Treasury is still trading well below the overnight rate. If we look back to the 1994 bond bear market, the 5-year traded about 250 basis points above cash — versus about 100 basis points below now.
The explanation for this disparity can be pinned on the Fed reaction function....
Bond Economics
Brian Romanchuk
1 comment:
"there is no valuation reason for it to stop..."
No kidding. Why even speculate on this? It's up to the Fed. Just sit tight and wait for the Fed to say definitively it's done raising rates. No need to guess.
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