At the same time the yield on 10 year bonds is falling - strange
It is not that complicated.
Nobody wants US Treasury Bonds
yield on 10 year bonds is falling
One of those cannot be factual. You decide which you want to believe.
Why not? If the price goes up (ROI going down), that means what? Exactly–we don’t know WHY the price went up. If nobody wants them, then they would not sell. So maybe the 10-yr is not the time frame people want to buy (today!). Tomorrow is another day. It may also be impacted by the threat of yet another US govt shutdown. Way too many variables, many of which are political (not economic).
I tend to agree, but there must be something else going on that I can’t see, because they are both true as far as I can see anyway.
Even The Fed. is getting rid:
Meanwhile, the Federal Reserve is selling down its own holdings, dumping yet more bonds into a market that doesn’t really want them.
Two things might be at play here. One, they never wanted to hold all those bonds to maturity in the first place. Two, its a way to influence interest rates.
Has the fed really started selling bonds? I thought they were simply allowing bonds to mature and not buying new ones to replace them?
(it’s functionally equivalent, but makes a difference for this discussion)
Still think no one wants US Treasuries?
The 10Yr Treasury rate has fallen by OVER 1% in less than 60 days.
The crazy, never seen before, volatility in bonds … is not a good sign in general.
But I suppose I timed my purchase of TIPS well earlier this year. It was mostly luck as I was still considering buying more if rates went higher. I bought some in June, some in Sep/Oct, and a little more in Nov/Dec. Looks like the Oct purchases are sitting on the highest capital gain so far.
I also bought some speculative very short-term TIPS (purchased Dec '22 and matured 4/15/23) last year that also provided a decent capital gain for a short holding period.
The CFA lessons tell us the bond market is more volatile than the equity markets.
Never seen before?
Friend, take a look at the 10 yr Treas chart. This is NORMAL. It probably doesn’t even make the top 10 fastest decreases, percentage or numeric.
Looking at the 10 year treasury chart itself isn’t sufficient. The “MOVE” index is more a measure of bond volatility. And in recent history, it’s only been higher during the GFC in 2009. We’ve seen about 2 years straight of heightened volatility after 10 years of relative very mild volatility.
But it’s true “never seen before” is apparently hyperbole that I must have heard on CNBC when I listen to it.
Admittedly, the MOVE index is new to me. Is that basically a bond version of VIX?
It’s new to me too! I just found it before I posted about it. It’s apparently indeed kind of like a bond vix.
The difference with the US paper the principle upon maturity comes back to you. However, the volatility is higher for bonds.