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>This is confusing to me too. The best explanation I've heard is that the market is expecting a future increase in bond supply (gov bond issuance to fund corona
by SilasX 7y ago
>This is confusing to me too. The best explanation I've heard is that the market is expecting a future increase in bond supply (gov bond issuance to fund coronavirus mitigation measures), which would drive prices down and yields up. This future price pressure is being priced into bonds today.
Interesting! If so, maybe we could see an end to the financial markets' seemingly insatiable demand for Treasurys?
- manic85 7y agoHard to say right now, but it's likely that bonds won't go up again until people believe the rate of new bond issuances will go down. On another note, the federal funds rate is at zero but bank stocks are cratering anyway, possibly because Trump announced there will be no foreclosures/evictions through April. So landlords and homeowners have no incentive to pay their mortgages for a couple months, which will definitely hurt banks.
- jcfrei 7y agoI don't know about the demand side but supply is definitely going up around the world. For the massive stimulus packages in the US and Europe lots of new bonds will be issued by governments. Additionally lots of companies around the world are drawing on their credit lines which means banks need to reduce their treasury holdings for USD. The only question that seems to matter is how high will central banks allow yields to rise?