JPMorgan's Jay Barry on the Big Selloff in Bonds

Published Oct 11, 2023, 8:00 AM

In the past week, the bond market has experienced a historic selloff. Yields on benchmark 10-year US Treasuries soared towards 4.9% while those on 30-year debt reached the highest since 2007. But the exact cause of these dramatic moves in the most important market in the world aren't entirely clear, with people looking at everything from the Federal Reserve's outlook for interest rates, to the the jump in the price of oil, or booming supply as the deficit expands, as well as more technical things like the term premium. So what's driving the selloff and how do we disaggregate interrelated things like supply and demand? How do you decompose longer-term and short-term factors feeding into the price of US Treasuries? What can stem the big moves? And what are investors saying about their appetite for US debt? We speak with Jay Barry, co-head of US interest rate strategy at JPMorgan Chase, about the big bond market selloff.

Hello, and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.

And I'm Joe Whysnal So Joe.

The big story in markets up until relatively recently has been the bond sell off, Like quite a dramatic sell off across the fixed income space.

Yeah, really over like I guess this is the last couple months. So the yield today, well, we can sort of talk about the bond market up until today, but you know, we had been like in the threes and the fours and then we got us almost besides four point nine percent on the tenure, I've had a little bit of a pullback. We're recording this October tenth, but we are very high by any recent standard.

Yeah, it is not lost on me that we are recording our bond sell off episode on the day when treasuries are recording their best one day performance since I think March of last year. But you know, we're trying, We're trying. But you're right. The recent bond market itself, it was one of those times when you see a lot of superlatives around, a lot of like highest yields since two thousand and seven, a lot of talk of standard deviation moves when we try to start calculating, you know, how many trading days it would normal trading days it would take to get moves of this size. But the interesting thing about this whole dynamic is it's not really clear what the proximate cause of the sell off is. So you have a lot of people blaming you know, the recent FOMC meeting when they release the dot plot showing higher for longer. You have some people blaming oil. You have people talking about supply. Some people are looking at more technical aspects. You have some people blaming the term premium, which I find absolutely hilarious because to me, a higher term premium is like a symptom of the sell off, not the actual driver of it. But anyway, all of this means we really need to try to get into the weeds of what is happening here and what it might mean for the wider market.

Right because even if okay, maybe last Friday, right after their jobs report, when we got that very brief spike, maybe that was the peak. Who knows. But I do think it's important to try to disambiguate these things because, as you said, like I guess it's one of those things when there's a lot of explanations for something, none of them are like very satisfying, Like a lot of deficit talk lately, but it's like what, like, Yeah, what did we all do? I think we knew that the deficit was really big for a long time. Is that recent FED meeting? But again, okay, like the twenty twenty four dods came up a little bit, but does that really outrageous four point nine percent on the tenure? Nothing is quite satisfying as to what happened and why we're at this sort of like new.

Level exactly well put. So today I am very pleased to say we do, in fact have the perfect guest. We're going to be speaking to a bond analyst. I've been a fan of his research for a long time. He used to work with one of our other favorite All Thoughts guests, Josh Younger. We're going to be speaking with Jay Berry. He is the co head of US and stret strategy at JP Morgan. We're going to be trying to get a handle on what might be driving the moves in bonds, but also how you go about as an analyst trying to disaggregate all these different factors. So I'm very excited. Jay, Thank you so much for coming on our thoughts.

Tracy, thanks so much for having me really appreciat being here.

So I guess maybe just to begin with, I mean the simple question what is driving the sella, We'll start there and then we can try to dig into different pieces.

Well, I mean, Joj just said there's a whole host of reasons that have been bantered about and that maybe none of them are all satisfying. But I really think it's the confluence of a number of different factors here. So I mean an aggregate, Now we're off the highs and yield, as you said, but we're still about one hundred basis points higher than we were in the middle of the summer. And to me, it's like, what's changed over that period? And I think the early part of the move you could say was definitively a story about the US economy and fundamentals, because I look back at where we were very early in the summer and where we are right now, and over that period, we increased our second half growth expectations at JP Morgan by about two and a half percentage points from like the mildest of recessions. If you can call it that to looking for above trend growth the second half of this year, and that's like a meaningful driver I think of the move and long term rates because it's given us more confidence that the recession may be a bit further off. But it's also helped sort of anchor FED expectations at higher levels as well. So, you know, we haven't really changed the expected peak in the FED funds rate since the early part of the summer, but we pushed out the timing and we've pushed it out from you know, at that time thinking it was going to happen around now, to sort of pushing it out to the early part of next year. But then the more powerful influence is that we've disinverted that money market curb a bit, and that you know, early in the summer, we were pricing about one hundred and fifty bases points of cuts for twenty twenty four. Now we're pricing in still cuts, but we've taken out about forty percent of that. So I think the first part was fundamental, but then I think the drivers began to shift, and more recently since September, you know, FED and growth expectations have been pretty stable, but inflation expectation has been rising, and we like to get five year ahead, five year inflation expectations from the tips market, from the inflation link treasury market, and those break even expectations have gone higher by about twenty five basis points over the past six weeks.

Wait, this is the five year five year forward break even? Is that the exactly the thing that you like to look at. And I'll bring that up on my terminal while you're talking about it, So I understand, Okay, growth has picked up or versus expectation, certainly compared to the beginning of the year, when, as you say, like almost everyone expected recession. Now we're at above trend growth. Maybe it don't moderate, et cetera. What is the link between that and thirty year yields or the long end of the curve, Because of course I get it the short end. It's very easy to draw a very bright line between short term rate expectations and the two year bond or whatever. But then when you get further out, it's like, Okay, why does the growth picking up in Q four of twenty twenty three effect that people are going to pay for a bond that matures in the twenty fifties or whatever.

No, I think there's still some sensitivity of policy that sort of reverberates through the term structure, and the sensitivity may decline the further act to go, but it's still there. So just for a number, you know, every one hundred basis point change in FED policy expectations three to six month forward tends to sort of change long term meals by about forty to forty five basis points. And similarly, like every change in year ahead growth expectations tends to move long term meals by five to ten basis points. So yeah, the further you go out the term structure, the more I think idiosyncratic it becomes. But there still is sensitivity to what's happening to the underlying economy and what's happening with FED policy. So I think it's still there, just with a lower sensitivity than at the very short end.

How do you actually go about, as a strategist sort of decomposing the different moves into different factors or drivers. And I know that you have at JP Morgan, for instance, this fair value model of where you think Treasury should be trading. And I think last week you were saying that you thought that yields had overshot fair value, which you know, I'm guessing you didn't expect what happened over the weekend in Israel to actually happen, But it seems to have been quite precient because we have seen yields come down a little bit. But how are you actually analyzing the different drivers of a move in rates?

Yeah, so you've talked about the fair value model. I think that's a key input to what we do because we try to identify empirically what have been the largest drivers of yields over time, and we can look back over windows of five or ten or fifteen years, and we've got a host of factors that are sort of always consistently in the framework. And we talked about FED policy, growth, and inflation expectations being the three key drivers, like the triumvirate, so to speak, and then other factors which at various points over the last you know, ten to fifteen years, have been important and less important. I mean, there was a time when with policy rates at zero and negative territory globally, we had the share of the bond universe that was trading it a negative yield globally because policy rates being anchored at very low levels helped anchor US rates lower and that was important but less important right now. So that starts, and you know, if we have a sort of center universe about where we think fed policy, growth and inflation are headed, that's a starting point. And you're right, like when we adjusted for those factors, there was a point last week where it looked like we were trading about thirty five or forty basis points too high, where you know, you're talking about standard deviations. Before that was something like a two and a half standard deviation move relative to fair value in our framework, and one which we hadn't seen since this time last fall, after the uk LDI.

Crist Right, which was the other big bond sell off.

And really since the spring of twenty twenty two. So I think, you know, we take notice of that because it's hard to say, you know, I think we've all been pretty humble to the fact that the economy has been resilient. It's been tough to call, but we have to have something that sort of centers like where should rates be and how far have they gone? And this was at least a flag to us that they'd gone too far.

You mentioned sort of factors driving the US Treasury price and how those have evolved over time. Can you spell that out in a little bit more detail, Like I would be very curious to hear more about what is driving moves now versus say, maybe pre twenty twenty.

Yeah, I mean, I think you know pre twenty twenty. We just briefly talked about one of those factors, low and negative policy rates elsewhere meant that even as the US was increasing rates during the twenty fifteen through twenty eighteen cycle, that was something that helped anchor long term yields at lower levels. And you could see the influence there when you talk about the hedge dyel pickup for US bonds for versus most foreign currency pairs, and that has since of course eroded because basically ever made every major develop market central bank has been increasing policy rates at a rate. And the last of which that's out there the Bank of Japan, we think at some point will completely lose its YCC band and well at some point exit negative interest rate policy next year. So that was an important factor which we now don't have as a factor in the model.

The Bank of Japan. It was like about a month and a half ago or two months ago, like sometime in August. I forget that because I have to admit, like all these Bank of Japan had lines about whether they're going to like keep the ten years er or whatever, like they all sort of blur. But there was like some news that happened. It was something the Bank of Japan that like changed the entire tenor of the market all at once. Can you remind me of what I'm like forgetting here.

Yeah, Joe. In late July, the Bank of Japan basically allowed jgbs in the tenure sector to try trade even wider around it's sort of plus or minus fifty basis point target and effectively kind of gave you notice that at some point it was getting closer to completely removing that Y series.

They're having their highest inflation in years too.

Right exactly, Okay, exactly, So, I mean I think on a partial basis, you can argue that was a catalyst as well.

Can you talk about when you talk about these foreign buyers, as you say this sort of like price in sensitive demand from a foreign sector, the disappearance of these price in sensitive foreign buyers, how much does that affect rates versus say, just like rates volatility.

By the way. This is why I really wanted to get Jay on for this podcast, because he wrote a great note about a year ago basically talking about the retreat of price and sensitive buyers in the form of foreign central banks and the FED as well as it was winding down its balance sheet. I think I wrote it up under the headline JP Morgan is worried about who's going to buy all the bonds and at the time it got a lot of pushback. But fast forward a year and again it seems like you were broadly directionally correct.

No, I think it's an important driver over a longer period of time. Like it's hard to say, and Tracy, you said this before, like whether it's the proximate cause of the selloff, but I think in the background, it's something that's contributing to what's going on because to us at JP Morgan, you know, we look at three sets of buyers who have been the main price in sensitive sources of demand for the better part of the past two decades at various points. And you talk about the foreign demand story, I mean, we know that FX reserves peaked about seven or eight years ago. The dollars share of those reserves have been coming down. But there's a point in time at the beginning of the century where FX reserves were growing so rapidly and the share of those reserves held in dollars were so rapidly that the deposit of that savings into the US, I think was something that kept long term rates low. And your remember chair green Span talking about this and the conundrum in two thousand and five about why long term rates were not rising even as the FED was tightening. So that's a key driver right there, and we look at it. FX reserves we don't really expect to grow appreciably from here, and we're not in the d dollarization camp, but the dollar share of those reserves have been on a downward trend as central banks globally have been diversifying. So it's just saying that if that was a tailwind for rates for the better part of the first half of this, you know, last twenty years, it's not there the second one. And this was more local or the US banks where they bought about three quarters of a trillion of treasuries over twenty twenty and twenty twenty one when supply was heavy, largely due to the fact that deposit growth at strip loan growth. And now we know deposits have stopped coming down like they did in the spring, but they're not growing. And I think one would think even as deposit growth picks up, that banks, after what's happened here, might generally speaking bias their purchase is shorter along the yield curve, which with less duration risk. And then the final piece of the puzzle is the FED. And I think we lose this that even though we're coming to the end to the FED policy rate tightening cycle, or we think it's actually concluded, balance sheet policies operating in the background, And just as the boj JO was really important at the end of July, I think chair pals comments at the July press conference were is equally important because a reporter asked him about whether the FED could continue to do QT while it actually lowers interest rates as inflation comes down next year, and he made the point that you'd be normalizing both the policy levers may be in opposition, but you're normalizing the balance sheet as you're normalizing rates. And I think the extended runway for QT matters because we found over a longer period of time the FED stock of holdings matters for yield levels and as that unwind that should slowly keep long term rates anchored at higher levels and re steep and yielders.

So you have these longer term factors I guess happening in the background the retreat of these three groups of price insensitive buyers. Just going back to some of the short term catalysts here. You know, you mentioned term premium in the intro. Term premium is one of those concepts. I feel like it gets bandied around quite a lot. Not everyone quite understands what it means, but also there is no consensus, like.

Myself, but you're not. I'm about to learn something that I've always been want to.

But see you're missing out, Joe, because you should just start saying term premium. Just blame everything on the term premium and just use it as a scapegoat for any like any move that you don't agree with or that you are on the wrong side of. That's how most people seem to use it. But okay, maybe just to begin with, what is the term premium and what has happened to it in recent weeks?

Yeah, so the term premium in you're right, is nebulous term I think is the extra compensation required for investors to buy longer duration assets.

That is a perfect definition that I'm pretty sure I have used in my own copy before.

Just made sure I googled it before. But I think there's a number of ways to look at it, and I think we can start and just talk about our fair value framework, and I think we can say everything outside of these fundamental drivers, one might possibly attribute to term premium that in the absence of being able to explain with growth and inflation and FED policy expectations, that that's a driver. There. There's also a series of very widely watched academic models. There's the ACM model from the New York Fed, the kim Wright model that the Federal Reserve Board in DC watches, which are a series of I think no arbitrage term structure models which are kind of mean reverting in nature, and those were sitting relatively low until recently, and they actually would attribute most of the sell off over the past six weeks to term premium. I think we've done a paper on this, and we think that there's some idiosyncrasies with the way that these models are constructed because they are sampled over a period of declining rates that they attribute a lot more to changes in policy expectations than term premium. So it turns they can be less sort of influential or less I think insightful. They're still very valuable, just less inciseful at these turns. And then there's finally more empirical ways to measure it too, because there's survey based measures of where economists expect policy rates to be, like the survey professional forecasters, yeah, and the survey of primary dealers, where you can observe where economists think policy rates will be over the next five to ten years, and you can compare them to ten year rates to get a sense of the extra compensation that's required.

Right, So this is the key, right, because the basic idea is a long rate is just a series of overnight rates, and so that gap, if you have some estimate of where the overnight rates are going to be over the next ten years, then you look at the yeld them. Theoretically, that gap is the turn.

The term premier.

Exactly Can you talk about sentiment? And you know that strikes me tracy that we were recording this basically literally a month after we interviewed the bond King Bill grows, in which he said he doesn't own any bonds, and so it really strikes me that is like, well, people hate bonds right now, like people really hate them, and everyone like in that month since we talked about first of all, when we had that conversation, the ten years closer to four point two percent, So very timely call. But you know, in that month, I do not recall there's so much talk about the deficit. There's so much talk about what at all of these dates, higher inflation higher for longer we can't get it under control? Like how do you measure sentiment and how much does that drive some of these moves.

I'm glad you asked that, Joe, because I think it can be really influential over shorter periods of time, say four to six weeks. So there's a host of metrics that we like to watch from the CFTC's data on sort of speculative positioning in interest rate futures, some more empirical models that sort of track the performance of hedge funds and asset managers. But my favorite ends very close to my heart because it's been something I've been working with for like more than two decades, is our weekly JP Morgan Treasury Client Survey. It's a bit of a misnomer because it's really our duration survey of the aggregate exposure of our rates franchise, and every week we ask the same number of clients in our franchise whether they're long, neutral or short duration, either outright or relative to bench mark. And we've found that when that measure sort of moves very sharply away from average levels, it can have a mean revert effect on yield the opposite direction. So you talk about sentiment, I think everyone through the spring and summer was trying to handicap when the FED would be done raising rates, thinking the next move is going on hold, which would be the precursor to rates moving lower. And our survey back in July and August was as long as it had been in over a decade, and it gave you a signal that over the next five to six weeks there could be some risk that rates move higher on a systematic basis, and that's what we've had now walk that forward in our latest survey, which is about a week old right now, is back at its most neutral level since April. So I get the sense that perhaps part of this move over and above the fundamentals could be investors reassessing those duration positions as we've priced higher for longer. Where you talk about the supply of dynamic here at work, maybe that's in the background against the backdrop of large deficits. But I think sentiment is a really large driver over shorter periods of time.

So two questions on that. One, there has in this argument that as yields go up and prices go down, you are going to see some maybe buy the dip buyers start to come in and support the market. So one would you expect that to happen? And then two on the duration portion of it, like how much appetite is there for duration structurally in the financial system nowadays? And I guess a simpler way of asking that is why buy a bond at all? Especially at a time you know what I understand, Maybe you're a pension fund and you have long liabilities and you're trying to match them or something like that. But on the other hand, you do have the FED really taking a harsh look or a harsher look at duration risk, telling banks big buyers of bonds, as we were discussing earlier, that they are going to be looking at interest rate exposure and things like that. So what is the attraction of bonds at all in the current market now?

I think that's a great question, And I mean, bonds are an investment alternative that are viable for the first time in fifteen or sixteen years here right. I mean you talked about it about the opening treasurey yields hitting you know, PREGFC highs.

Across the curve.

You know, aggregate fixed income yields for like an aggregate fixed income bond in next are probably still close to six percent right now, and so I think that's a viable investment alternative just for a broadly diversified portfolio. So I think that means there's probably a pool of asset managers that could have demand for bonds over time. But I think that's only one piece of the puzzle because it takes, you know, a very attractive yield level, which we've got, but also it takes sort of more stable returns. And you started to see that at the beginning of the year when yields started to stabilize, infunds inflows excuse me, into bond funds started to accelerate, but that sort of petered back when volatility began to pick up, and because now year to date we've got fixed income returns negative for the third consecutive year. So perversely, I think it's a little bit of like a chicken and egg. You need the attractive yields, but you need stable returns as well, and we haven't gotten that yet with the speed of the backup, but it's been talked about a lot. I mean, you look at the money and Government and Treasury Money Market Fund. It's over four and a half trillion dollars, and that obviously increased as bank deposits were falling earlier this year. But I think there's reasons to think that as yelled stabilize and you consider the fed on hold, there's room for that money to extend out along the curve. So that's one big buyer right there. I think the others that we've looked to in the past are the US Pension Fund Community Defined Benefit in Nature, and that's a three and a half trillion dollar universe an AUM. Their funded ratios are above one hundred percent, really sustainably for the first time since the financial crisis, and their fixed income ACID allocation has been rising for the past decade plus I think they had an existential moment back in twenty eleven twelve, when funded ratios were well under one hundred percent and their fixed income ACID allocation was only something like thirty five percent for managing a longer duration liability. But it's now over fifty percent, and one would think that there's probably more room for demand there. But again, I think the nature and speed of these moves mean that most active investors who have I think more leniency before they add duration are sitting back waiting to see sort of vowel receid.

First, that's interesting that the upside of this violent bond sell off might be pension funds being sort of fully funded for the first time in a long time. But on that note, so one thing you often hear in the bond community is that drawdowns don't necessarily matter. Or you know, prices are going down, but these are marked to market moves, and you know your yield is going up at the same time, and so what does it matter if the mark to market is going down because eventually you would expect to get all your money back from the US Treasury. Is that a viable claim? Or you know, is it possible for everyone to look through these violent moves, or I guess another way of asking it is at what point do these become more of an issue?

So I think you should be able to look through them. But for more active managers who are managing versus a benchmark, I mean, we can look at series of returns on a weekly or a monthly basis and see how those various funds are doing relative to their peers. So I think you know there is some psychology to not deviate too far away from more average excess returns are headed. And I think that's important because excess returns over and above index, which index being negative for the last three years. Excess returns for the asset manager community have been, on the average pretty challenging the last couple of years, so I think there is a degree of sensitivity there. So I think that's sort of an impactful story there, which means that there is some sort of psychology, particularly as the fundamentals are shifting, to kind of neutralize your positions more quickly, even though you may be able to look through it. And then there's a separate story about flows, which is over and above the existing stock of aum you've got that you probably need to see returns stabilize before you see incremental inflows from investors out of money market funds or out of other asset classes into fixed income as well.

Can we talk a little bit more about supply. I mean we talked about the demand or the lack of the price and sensitive demand. It really feels to me like awareness of deficit. People always talk about deficits and high deficits, but it really feels to me like focus on deficits in the last month or so reached some like fever pitch when you talk to clients. Did you notice that as well, like just a lot of conversation about deficits, Joe, I.

Haven't had as many conversations about deficits and treasury supply over my I think most of my career as versus what I've had the last couple of months. Well, it's hit a fever.

Pitch, And so how do you think about deficits as a driver or like decomposed like supply the supply side when you talk to like attributing aspects of this right move?

Yeah, I mean, I think supply matters in the context of that demand that we're just talking about, And there's a big shift that's happening. But to your point, I haven't learned anything incrementally new over the past six weeks or so that I didn't know a few months ago. And I think we've known that deficits over the next ten years are expected to be wide for some time, and maybe you can say incrementally the last couple of months, because yields have risen, the expectations over inter six spents at the federal level are higher, thus even adding to that pressure. But I think people look at the Treasury's quarterly refunding announcement on all August first as being a seminal driver there where the Treasury made and announced a series of pretty large increases to coupon auction size, is the first since the pandemic era, and sort of foreshadow to the bond community that these were likely to continue for a number of quarters at a time. That's been on our minds for some time, Like our issuance forecast for some time, I've been calling for a pretty sharply so like anyone.

Who was plugged in saw that some of these coming.

But I think maybe the fact that it was like, you know, the whites of the Treasury's eyes and actually seeing it mattered, but it's large, and I think we think coupon issuance and treasuries is going to double next year from this year. And in duration terms, you know, we think we're running about two point three trillion and ten year treasury equivalents this year. We're probably going to issue about three trillion and ten year equivalents next year. So it's a thirty five percent increase in duration supply into next year. And I think it matters because deficits as a share of GDP are larger now with the economy sitting above trend and growth and the unemployment rates sitting well below four percent, that I think just in the background there's concerns that when there's a downturn, how big will these deficits be.

Yeah, So we are recording this on October tenth, and the benchmark yield on the ten year treasury is down from I think it was like four point eight seven percent last week. It's now at four point six percent, partly because of this flight to safety that we've seen. Pulling it all together, you know, we talked about the long term factors here, including the decline of price and sensitive buyers booming supply some of the short term technicals. What's your outlook going into twenty twenty four? And I guess I don't mean to sound mean or incredulous when I say this, but like, how can you have any certainty at this point about what's going to happen when what we've seen for the past year is this continued defiance of expectations.

No.

I think there's a lot of humility there, because if we had sat here, you know, nine to ten months ago and talked about the outlet for twenty twenty three, we would not have pegged ten yere yield sitting at four sixty two like they are right now. But as I think ahead and I look into the end of this year in twenty twenty four, let's think about the economy, and again we're not in the recessionary camp, but we see and we forecast growth moving below trend under the weight of the shift in policy rates that we've had, but also because there's other incremental factors with higher energy prices, with the beginning of student loan repayments. Coming back to think that growth will be slower next year than it was this year. We think FED policy is likely at a standing point with respect to policy rates that it's on hold, which is typically something over a longer period of time that's been supportive of yields stabilizing. And we think inflation is coming down, but coming down very slowly. So we've had a very strong disinflationary impulse the last three months. We think that's probably past its peak, and that the journey from three percent annualize inflation to two percent is going to take some time. So the Fed's probably done tightening, but we think the fed's also on hold for the next ten or eleven months or so, all the while QT is still going on in the background. So I think we can historically go back and look at the end of FED tightening periods as being very positive for yields peaking and coming back down. But I think these are the reasons a FED on hold for longer while balance sheet policy is still kind of sitting in the background working, and not just in the US but globally too, because the ECB and the Bank of England are doing QT, and one would think that the Bank of Japan might have to defend its purchases or its YCC target less forcedly as well. This is something that's going to keep rates elevated for a longer period of time versus what we've seen in prior FED on hold periods, particularly when inflation remains above the FEDS two percent targets. So we see scope if there's some mean reversion here back to our model fair value for rates to fall about thirty basis points. But beyond that, I think it's a struggle to think that yields will be much lower if the FEDS on hold. But QT is going on and inflation is coming down, but we're past the peak of the disinflationary impulse that we've had.

Yeah, this was kind of Austin Goolsby's point as well, that you know, even a hold is kind of a continued tightening of financial conditions. Ja Berry, thank you so much for coming on thoughts. Appreciate you doing this at relatively short notice.

Tracy, Jeff, thanks a lot.

For having me. Yeah, thank you so much.

That was great, So, Joe, I thought that was a really good overview of all these different factors going into the sell off at the moment, and it does seem kind of complicated, and there is still this overarching question I think over the timing in the past two weeks and like, yes, the dots move slightly higher, but was that really enough to spark like this big, almost historic sell off that we've seen in bonds. I think to Jay's point, it does feel like there are some more technical aspects that might be driving it.

You know, there were a couple of things that stood out to those technical points, like his observation about sentiment and the fact that you know, up until basically July, up until maybe July August, everyone was thinking like, oh, the peak was in, you know, inflation is going to come down, and so there was just this sort of long treasury bid. Is interesting that you know, you sort of confirmed my hunch that there's just been this like real big pickup in like deficit talk the way we haven't seen in a while. Anyway, I really I've found that to be a very helpful conversation.

Yeah, it's kind of funny to think that, like everyone woke up on like October fifth and decided to become a bond vigilante, but they didn't, like, they didn't feel like that a month or two ago.

I mean, we knew like about the trillions and deficits for you know, as far as the eye can see, but it does. You know, it is weird, right. There hasn't been a ton of new information between you know whatever. That recent peak was on Friday and a month before. But I do think it was sort of like that month basically between our Bill Gross interview and now. It's just the amount of negativity and in the intensity of hatred towards Bond it just seemed to get wild.

The Bond King called it, yeah, all right, shall we leave it there?

Let's leave it there.

This has been another episode of the ad Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.

I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our producers Carmen Rodriguez at Carmen Arman and dash El Bennett at Dashbot. And thank you to our producer Moses Ondam. For more Odd Lots content, go to Bloomberg dot com slash odd Lots, where we post transcripts. We have a blog and a newsletter and you can chat with fellow fans twenty four to seven in our discord Discord dot gg slash.

Outlines and if you enjoy odd Lots, if you like it, when we delve into the technical aspects of the treasury market. Then please leave us a positive review on your favorite podcast platform. Thanks for listening, Stood in the

In 1 playlist(s)

  1. Odd Lots

    926 clip(s)

Odd Lots

On Bloomberg’s Odd Lots podcast Joe Weisenthal and Tracy Alloway explore the most interesting topics 
Social links
Follow podcast
Recent clips
Browse 926 clip(s)