Bond market selloff continues. What gives?
Yields on 10-year Treasurys rose even higher Wednesday, briefly hitting 4.25%
Things/Shutterstock modified by Blockworks
This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.
There is something going on in bond markets.
Yields on 10-year Treasurys rose even higher Wednesday, briefly hitting 4.25%. Two-year yields are also on the rise, reaching 4.07% Wednesday afternoon. (Remember, bond prices and yields are inversely related.)
What gives? A few things. Probably.
The first is the election. Polls are still saying the race between Trump and Harris is more or less a coin toss, even as betting markets continue to favor Trump. One theory is that bond markets are anticipating a Republican sweep and are reacting as such. There’s fear that Trump’s plans (higher tariffs, tax cuts, a crackdown on immigration) could send the deficit higher, so it makes sense that Treasurys are tanking.
I’d personally give this theory some weight. But I think the main thing dragging down bond markets are fundamentals.
As we also covered yesterday, economic data is strong. Maybe even too strong, or at least strong enough that analysts are questioning whether the Fed went too far in September. We know committee members said they see rates ending the year another half-point lower, but the market has its doubts. Higher interest rates means higher Treasury yields.
And then there’s the national debt. The federal deficit hit $1.8 trillion earlier this month. More debt = more bonds. Higher supply = lower demand. You get the idea. To be clear, I do think concerns about rising national debt are impacting bonds, but I think it’s a concern that goes beyond a potential second Trump presidency.
As always, this isn’t investment advice, but I think the flash sale on bonds might go on for a bit longer.
Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.
Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.
Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.
The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.
