Bond yields rose. Some investors decided this meant bonds were now cheaper. These are the same people who think a sale at Kmart is a good deal because the sign says fifty percent off.
The bond market whipsawed all week. Prices dropped. Yields climbed. Somewhere a strategist pulled up a chart and convinced himself he'd spotted value. He called his clients. He used words like attractive and dislocated. He did not mention he's been wrong about rates for eighteen consecutive months.
Medium and long-term bonds got slaughtered. The smart move was staying away. The retail move was treating duration risk like a clearance rack at TJ Maxx. Can't pass up those thirty-year Treasuries at four-point-six percent. What a steal. Ignore the fact that if yields tick up another twenty basis points you're down three grand on a position you bought because CNBC said opportunity.
These traders see buying opportunities the way a drunk sees car keys. Technically they could use them. Probably shouldn't.
The whirlwind was price discovery. The market moved. It always moves. Calling that a whirlwind is like calling Tuesday a phenomenon. But portfolio managers need to justify their fees so they frame volatility as chaos and chaos as their chance to add alpha. They will not add alpha. They will add to their losing positions and call it averaging down.
Bonds sold off because bonds sell off sometimes. Yields rise. Prices fall. This is not hidden knowledge. This is how fixed income works. But every time it happens some guy in a fleece vest decides he's spotted an inefficiency that every other market participant somehow missed.
He did not spot an inefficiency. He spotted his own monthly performance bonus evaporating and panicked into a narrative.
Photo by Maxim Hopman on Unsplash
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