April 6, 2021

Q1 ended about as poorly as possible for the treasury market as losses according to ICE indices hit 4.6%, the worst quarter in over 40 years. The losses were highly concentrated on the longer end of the term structure. Inflation-adjusted (real) yields are negative on 10+ year government bonds. And market-implied 5-year inflation expectations are around 2.6% above the Fed’s target. Many would think that corporate bonds would be a reprieve from the losses but they too posted their worst quarter since the financial crisis. However 30-year yields are on an upswing and it may be the time to buy the dip on long-term treasuries.

(New York)

FINSUM + Magnifi: The bond market is having a difficult time reading the Fed, and inflation concerns are at all-time highs. The treasury market disruption is also leaking into tech stocks which have experienced turmoil in the last few weeks.

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