The 10-year Treasury yield hit a 19-year high this week. Retail traders responded by panic-selling their bond ETFs at a loss and asking Reddit why Jerome Powell hates them personally.
Here's what happened. Services data came in hot. Manufacturing data came in hot. The market looked at this information and decided the Federal Reserve might keep raising rates. Groundbreaking stuff. Really took some advanced calculus to connect those dots.
Bond traders spent the last three years convincing themselves that rates would stay at zero forever because the economy was permanently broken or something. Turns out borrowing costs can go up. Revolutionary concept. Someone should write a textbook.
The yield rocketed to levels not seen since 2007. That's the scariest part for most investors. Not the actual rate. Not the economic implications. Just the fact that a number got bigger than it was before. Pure intellectual laziness dressed up as risk management.
Every financial news outlet ran the same story. New data. Fed concerns. Yields rising. They could have written this article in 1994 and changed the date. Same panic. Same breathless coverage. Same retail traders getting destroyed because they bought TLT after watching a YouTube video about passive income.
The technical picture doesn't care about your services data. Yields were going higher regardless. The chart said so three months ago. But nobody reads charts anymore. Too busy refreshing their newsfeed waiting for Jerome Powell to tell them what to think.
Manufacturing sector data increasing worry of further rate hikes. That's the official line. The real story is simpler. Bonds were overbought. Prices fell. Yields rose. A child could have predicted this. Most professional traders apparently couldn't.
The 19-year high sounds dramatic until you remember yields were higher for most of human civilization and the economy didn't collapse into a black hole.
Photo by Brett Jordan on Unsplash
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