This year's bond selloff looking a lot like 1994


The meme that the 1994 bond market (AGG, BND) selloff won't happen again takes a blow as FRBNY researchers take a look and find this year's decline thus far is tracking 1994's carnage (and 2003's) fairly closely.

Where the moves differ is in the shape of the yield curve. 1994's rise in long-term yields was accompanied by higher short-term rates (as investors anticipated Fed rate hikes), leading to little-change in the yield curve. In 2013, there's been very little movement at the short-end, meaning investors are simply demanding more yield to hold longer-dated paper.

Popular Treasury ETFs: TLT, TBT.

Yield curve ETFs: STPP, FLAT.

Treasury bull Bill Gross (BOND) is beginning to sound maybe just the slightest bit desperate, tweeting minutes ago: "JOLTS data do NOT validate 200K payroll prints. More like 125K. Taper may be delayed if Yellen has a big vote."

Today's Jobs Openings and Labor Turnover Survey (JOLTS) is here.

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Comments (4)
  • Marco Mazzocco, CFA
    , contributor
    Comments (193) | Send Message
     
    SS Pimco is taking on water here.
    6 Aug 2013, 12:56 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1240) | Send Message
     
    Losers spin, winners grin.
    6 Aug 2013, 01:09 PM Reply Like
  • bbro
    , contributor
    Comments (11216) | Send Message
     
    I have 3 leading indicators inside the JOLTs survey all are momentum
    indicators based on private sector job openings,the hire rate, and the quits rate...all 3 remain positive for the economy....
    6 Aug 2013, 01:45 PM Reply Like
  • bixbubba
    , contributor
    Comments (363) | Send Message
     
    "Where the moves differ is in the shape of the yield curve. 1994's rise in long-term yields was accompanied by higher short-term rates (as investors anticipated Fed rate hikes), leading to little-change in the yield curve. In 2013, there's been very little movement at the short-end, meaning investors are simply demanding more yield to hold longer-dated paper."

     

    Isn't this a bit like saying that where Lincoln's play attendance differed from someone else's was in his getting shot?

     

    Ultimately, the value of a long-dated bond is the premium it pays over cash. As long as cash pays nothing (and is there _any_ indication that is ending anytime soon?) its the spread that tells you what you are paying for the long bond. And by that measure, it looks cheap.
    6 Aug 2013, 03:56 PM Reply Like
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