Bond yields went up Thursday. Erased Wednesday's gains. The Treasury Department changed its buyback policy Wednesday and the market loved it for exactly 24 hours. Then yields remembered they don't give a f*ck about buyback policies and went back up anyway.
Retail traders spent Thursday morning frantically Googling "what is a bond yield" and "can bonds hurt stocks" and "why is my portfolio red again." They found seventeen conflicting headlines. Read none of the articles. Panic-sold their tech stocks at a loss. This is called research.
The headline warns that higher bond yields can prove a stumbling block for the stock market. Can prove. Not will prove. Not are proving. Can prove. Like how eating glass can prove a stumbling block for your digestive system. Technically true. Also useless information unless you're actively considering eating glass.
Here's what happened. The Treasury said they'd buy back some bonds. Yields dropped. Everyone cheered. Then the bond market woke up Thursday and said "wait, we still have inflation and the Fed still exists" and yields climbed back up. Stocks got sad. The entire cycle took two days. Retail traders traded it four times. Lost money on all four trades.
The technical analysis here is crystal clear. Bond yields go up when bond prices go down. Bond prices go down when people sell bonds. People sell bonds when they think they can get better returns elsewhere or when they're scared or when it's Thursday. None of this has anything to do with whatever headline you read this morning.
But sure, let's pretend Wednesday's Treasury announcement was a market-moving event that lasted less time than a TikTok trend. Let's pretend Thursday's reversal means something different than Wednesday's rally. Let's pretend any of this matters more than the random walks of drunk bond traders who forgot why they bought Treasuries in the first place.
Your portfolio doesn't care what the Treasury Department announced on Wednesday.
Photo by Nick Chong on Unsplash
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