There’s rarely a dull moment in the US rates complex these days. If it’s fireworks you seek, the long-end of the US Treasury curve is happy to oblige.

As noted here Tuesday, 10-day realized vol on TLT (the long-end Treasury ETF) exceeded 10-day realized vol on the S&P by the most ever this week. The long-end, having lost its anchors, is trading like a penny stock.

The bond selloff extended on Wednesday. For a moment, the situation looked very dicey. 10-year yields were poised to make a run at 5% and 30-year yields were kissing the five-handle. Mercifully, the price action constituted enough of a concession to facilitate a decent 20-year sale. Bonds stabilized and, notably, appeared to respond to marked weakness in equities. Yields were still cheaper, but ended off the highs.

It’s worth noting that the term premium, after receding, bounced right back near +30bps. The repricing seen since late-July (more than 120bps) is the story in bonds.

Note that the chart above simply uses the NY Fed’s estimate. The term premium, you’re reminded, isn’t observable. The ACM model is the most widely-cited estimate.

The rebound was consistent with strategist commentary suggesting it was unlikely that the market was done repricing the term premium in light of the fact that none of the concerns which drove it into positive territory have in any way been addressed, let alone “resolved.” Note also that 10-year real yields, after retreating last week, likewise rebounded nearly 20bps.

“There isn’t any obvious reason for a revisit to a negative term premium as long as the US economy proves resilient enough to withstand policy rates at the current level,” BMO’s Ian Lyngen and Ben Jeffery remarked, in a Wednesday note called “Term Premiumania.” “Wobbles in stocks will be insufficient to convince the Fed that materially tighter conditions are in the offing; particularly not while the S&P is still up ~13% on the year,” they added. “Goldilocks remains the most common narrative at the moment, even if most fixed income investors have deep reservations.”

The overarching message from the last few sessions was that the duration “renaissance” (as Nomura’s Charlie McElligott put it), and the bond rebound more generally, was a false dawn.

McElligott on Wednesday described the prior session’s robust retail sales print as just the latest in a series of catalysts for the “resumption of hate-selling” in US rates. “Despite duration having recently experienced a (short-term) renaissance with regards to more dovish Fed comms and constructive flows taking shots on UST upside, we’ve seen a return to ‘death by a thousand paper cuts’ for bonds,” he added.

Here, from McElligott, is the problem:

When you add in 1) “still too strong US consumer,” with 2) “still too tight labor,” 3) the recent, modest re-acceleration in US headline inflation, and 4) US nominal GDP growth remaining in the 6-8% range, plus the long-term “structural” inputs of 5) government deficit spending trajectories, in turn leading to 6) issuance trajectory shocks, 7) an enhanced perception of “fiscal dominance” regime risk and all alongside 8) ongoing QT / balance-sheet unwind, we continue to get this rollicking term premium reset.

As ever, Charlie’s knack for re-capping markets in a way that resembles the glory days of SportsCenter, is much appreciated.

He also noted that SOFR spreads have removed ~30bps of priced-in Fed cuts for next year over the week, and 90bps since July.

Oh, and finally, there’s the overhang from currency weakness abroad. The “UST selling threat via FX reserve manager intervention flows” is back in play, McElligott wrote, flagging the yuan and the BoJ’s effort to cap JGB yield rise, which serves to pressure the yen, both because it’s indicative of “money printing” and, more importantly, because it ensures that on days when JGB yields are at or near the cap and Treasury yields are rising (and those days tend to coincide for obvious reasons), rate diffs are guaranteed to move in favor of the dollar.