The 30-year Treasury yield hit 5.3% this week. Someone compared it to 1987. That someone works in financial media and gets paid to remember exactly one market crash.
Here's what happened in 1987: stocks went down a lot in one day. Here's what's happening now: bond yields went up over several months. These events share nothing except both involve numbers and cause CNBC producers to experience physical arousal.
The comparison works if you ignore duration, asset class, monetary policy, geopolitical context, market structure, and the definition of the word "reminiscent." But why let any of that ruin a perfectly good panic headline?
Retail traders saw "1987" and immediately began uploading their entire portfolios to Reddit for peer review. They're now being told by a 19-year-old named Kyle that inverse ETFs are "basically free money" and that circuit breakers are a type of trading strategy.
The 30-year hasn't been this high since 2007. You remember 2007. That year went great. Nothing bad happened in the following twelve months. Everyone kept their homes and their jobs and their fundamental belief that markets are rational.
Technical analysts have been screaming about yields since they crossed 4%. Then 4.5%. Then 5%. They've now been right so many times in a row they're starting to think they understand economics.
They don't.
The actual story is simple: yields go up when bond prices go down. Bond prices go down when people sell bonds. People sell bonds when they'd rather have literally anything else. This week, apparently, anything else included cash, stocks, real estate, gold, cryptocurrency, and crude oil futures.
The comparison to 1987 will continue until either yields go back down or everyone forgets about 1987 again, whichever comes first. Smart money is on collective amnesia by September.
Photo by Markus Spiske on Unsplash
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