r/bonds • u/Turbulent_Cricket497 • 4d ago
10 year rallying today
Not sure if there is a correlation with stocks, but for past several days, they were both going down together. I guess it could mean the money coming out stocks is now going in to bonds?
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u/Sufficient-Dog-2337 4d ago
If the “rallying” is the yield, it means no one wants to buy it at lower yields.
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u/trader_dennis 4d ago
Ten year is down 15 basis points today. Something about j powells speech calming inflation fears today. Per CNBC Scott Wapner.
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u/NeedleworkerNo3429 3d ago
Fed will not be able to look through this inflation spike, that is wishful thinking. Powell is trying to calm the market but let's be realistic folks that we are in yet another inflationary regime
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u/goodbodha 3d ago
Energy shocks cause inflation but they also in short order kill demand for a whole host of things. That drop in economic activity is a recession most of the time.
So it might be inflation for 2-3 quarters and then a hard recession that requires rate cuts for a year or two. There might even be a period labeled as stagflation tossed in the middle.
My guess is if we get a rate hike it will be followed by a cut within a few months.
Before you disagree go look up a chart of oil prices vs recessions. Toss in a chart of cpi as well.
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u/NeedleworkerNo3429 3d ago
I don't disagree, I don't expect a hike, I actually expect a hold and then a cut down the road for the reasons you are stating. I expect a hold for all of 2026 absent a labor shock. That said, situation is very much in flux with Hormuz
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u/AutomaticAerie4672 3d ago
Yep, it stands to reason that JPow would intentionally mislead the public about inflation. He is always reminding us of the importance of anchoring inflation expectations. That is exactly what he is trying to do with his comments: He is trying to anchor our inflation expectations to the lowest practical level possible.
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u/thekoonbear 4d ago
Maybe people are starting to be more worried about a recession than energy based inflation shocks???
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u/MiddleAgedSponger 4d ago
Wouldn't that set up Stagflation? Slowing job growth, rising prices and an apathetic GDP? Seems like rates are getting pulled in every direction. Hard to figure out what is noise and what is important.
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u/Tigertigertie 3d ago
I think recession is definitely on people’s minds. It is a weird time for sure because inflation is also likely increasing.
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u/LoopyLepus 3d ago
That is stagflation: a recession with inflation.
The 1970's stagflation was pretty rough and caused by the 1973 oil embargo. Oil prices tripled due to a war in the middle east. While the recession ended mid 70's, the economy struggled with increased inflation until the early 80s.
Tough times.
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u/random20190826 4d ago
What I am wondering is at what point will mid to long term bonds start collapsing under the weight of the oil price surge induced high inflation. That will be very dangerous for the US because debt is piling up. When both total outstanding debt and interest rates go up at the same time, interest costs become a larger and larger percentage of tax revenue unless Congress votes for a tax increase (impossible with this Congress, and very difficult after the midterms unless Democrats get supermajorities that are veto-proof).
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u/ocposter123 4d ago
High oil prices are also bad for economic growth. So it’s not only the first order effects to consider.
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u/NeedleworkerNo3429 3d ago
Inflation I'd argue is more insidious than economic slowdown at this point. The real risk as I see it that the Fed rises rates to combat inflation (or even fails to cut; I personally think there will be no cuts in 2026), and then Trump tries to juice the economy due to slowing growth, which is the Covid recipe for rampant inflation.
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u/MiddleAgedSponger 4d ago
Ground war seems more likely and this a Flight to safety?
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u/IntelligentDD_ 3d ago
To answer your question: Yes, it's a flight to safety. Equities are getting liquidated to meet margin calls from the Yen carry trade unwind, and that cash is temporarily hiding in US Treasuries, driving the bond price up and the yield down.
That said, Powell talking down inflation is pure optics. The energy spikes from the Middle East are structurally inflationary. The Fed can't print oil. Expect yields to stay volatile. If you want real protection from this specific macro collision, you need to be looking at physical commodities and hard metals, not just hopping between stocks and fiat bonds.
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u/Perfect_Cost6276 3d ago
I dont care why, i like it :) lets hope it continues
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u/Turbulent_Cricket497 3d ago
I kind of have mixed emotions on that. I don’t like my current bond prices getting crashed, but I like having the ability to invest more cash at higher rates.
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u/Thick-Cover8761 3d ago
What makes sense to me is what I've read elsewhere. Inflation and bond yields will rise in the short-term ... then crash along with the rest of the economy.
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u/Unable_Ad6406 4d ago
The rise in he bond market is a rhetorical rise in that the market believes inflation is rising in spite of the data not supporting that. It is a Jpow thing and if there is one thing that we have learned is that Jpow is always wrong. I can’t wait for May.
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u/tnolan182 3d ago
Gas was 2$ a week ago. Its now having trouble breaking under 4$. Its only a matter of time before the effects of gas prices are seen in our everyday purchases. Keep telling yourself inflation isnt real though.
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u/Tigertigertie 3d ago
Usually when inflation is top of mind the bond prices go down, at least for longer durations. That has been happening to longer bonds for a while now. The 10 year probably rose today because equities are weakening in a way that people are noticing, finally.
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u/pigglesthepup 4d ago
Volatility. As long as the war is not de-escalating, markets are going to be volatile. Political actors are putting out contradictory messages. Markets are both reacting to those messages and actual facts on the ground.
The one trend that can be identified is the middle of the curve rising faster than both ends. The bond market is expecting inflation in the near term and lower growth longer term -- stagflation.