Fixed income market watchers ascribe the run to a number of variables. That's the quote. A number of variables. This is what passes for analysis when bond traders need to explain why their spreadsheets turned red.
Debt yields started climbing in June. The article calls this a bad time. As opposed to all those good times when borrowing costs spike and the treasury market implodes. Those monthly celebrations where everyone gathers around the Bloomberg terminal and cheers as the ten-year rips higher.
Here's what retail bond investors heard: yields are surging. Here's what they did: bought long-duration ETFs at the exact top because some guy on Twitter said rates had peaked. Then they watched those positions crater while the variables kept numbering.
The problem with fixed income is that it's called fixed income. Nothing moves except when it does. Then it moves fast and your supposedly safe allocation turns into a leveraged bet against the Federal Reserve's mood swings.
Market watchers love variables. Variables means they don't have to pick one reason. Could be inflation expectations. Could be supply dynamics. Could be foreign buyers stepping back. Could be literally anything that lets them fill a paragraph without committing to a forecast they'll be wrong about next month.
June was three months ago. The surge has been surging for ninety days. That's not a surge. That's a trend. But trend sounds less urgent than surge and urgent is what moves subscriptions.
The treasury market is the most liquid in the world until you need to sell something. Then you discover liquidity is just another variable someone will ascribe your losses to.
Bad timing implies good timing exists. It doesn't. Yields go up when you buy bonds and down when you sell them. This is called the market having a sense of humor. The joke is on your portfolio.
Photo by Marek Studzinski on Unsplash
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