Bond Bears Revel In Worsening Long-End Selloff
This week's earliest price action underscored the peril inherent in leaning long duration into a trending bear steepener.
As expounded here at some length over the past several days, I doubt seriously the notion that the selloff at the long-end of the US Treasury curve can continue unabated in perpetuity.
That's only barely a straw man. Bond bears have it in their heads that the (compelling) case for structurally higher yields may preclude (or at least raise the bar for) a rally in the event t
H-Man, in agreement that something in the form of duration shock will stop the bears but absent that shock, not sure how much more this has to run.
When
– Mortgages are 8%
– Auto loans 12-18%
– Credit cards 25%
– Middle market commercial credit 11-14%
– Five year notes issued at 3% in 2020 are a year from refinancing at 8%
– Cap rates are 200 bp below T-bills
with large parts of the economy – houses, cars, credit-driven spending, development, small/medium biz borrowing – slowing to stasis,
with industrial PMI already hovering in contraction,
job openings falling, hiring slowing, wage hikes fading,
analysts will still be forecasting +10% earnings growth next year
and stocks will look attractive on outyear numbers
that never arrive.
Poetry, John Liu. Well played.
Agreed. I will keep track.