Posted To: MBS Commentary
Over the past two days there has been a relative explosion of analyst interviews (from big firms like JP Morgan , etc.) calling for big, inevitable pain in bond markets. This is a familiar tune after bonds begin moving higher from long-term or all-time lows, and it’s been especially prevalent in this era of negative rates in many European countries. The gist is that even the bonds with positive yields are yielding nothing after inflation, and thus the gains are being driven by traders expecting to sell bonds at higher prices than they bought them. To that I would simply say: ” duh.” This has been the case for a long time during the post-crisis period. We’ve often discussed the “delta” in prices being one of the key drivers of bond market demand. I don’t know…(read more )