Rescue Pledge Triggers Biggest Treasury Bond Rout Since 1982

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InvestingGeek
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Joined: Tue Aug 28, 2018 6:31 am

Rescue Pledge Triggers Biggest Treasury Bond Rout Since 1982

Post by InvestingGeek » Tue Mar 17, 2020 10:51 pm

The answer's probably obvious but can someone here explain to us laymen why deficit spending here should cause treasury yields to rise? Default risk is low. Is it because the market expects higher inflation and higher interest rates in future? Is it treasury bond holders fleeing to stocks (and maybe even corporate bonds) in face of expected stimulus? What are the mechanics here?
https://www.bloomberg.com/amp/news/arti ... since-1982

The Treasury market buckled Tuesday at the prospect of a flood of U.S. spending to fend off an economic nightmare.

Yields at the long end of the curve shot higher on Treasury Secretary Steve Mnuchin’s proposal for a $1.2 trillion stimulus package. Rates on 10- and 30-year bonds shot up more than 36 basis points, their biggest one-day increases since 1982, while an iShares ETF tracking Treasuries maturing in 20 or more years sank a record 6.7%.
Last edited by InvestingGeek on Tue Mar 17, 2020 10:53 pm, edited 1 time in total.

dukeblue219
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Joined: Fri Jan 29, 2016 12:40 pm

Re: Rescue Pledge Triggers Biggest Treasury Bond Rout Since 1982

Post by dukeblue219 » Tue Mar 17, 2020 10:53 pm

You're looking at reasons demand will remain strong. But there will be more supply even if demand remains the same. Prices will go down.

All else being equal of course...

marky2kk
Posts: 37
Joined: Tue Feb 11, 2020 10:53 am

Re: Rescue Pledge Triggers Biggest Treasury Bond Rout Since 1982

Post by marky2kk » Tue Mar 17, 2020 11:06 pm

Just risk sentiment. Risk on, risk-off. Today was risk-on. It's good news for the economy potentially mitigating the impact of the virus. Stocks rise and yields rise. It's not higher rate expectations and it's not increased inflation expectations.

Topic Author
InvestingGeek
Posts: 314
Joined: Tue Aug 28, 2018 6:31 am

Re: Rescue Pledge Triggers Biggest Treasury Bond Rout Since 1982

Post by InvestingGeek » Wed Mar 18, 2020 9:35 am

dukeblue219 wrote: You're looking at reasons demand will remain strong. But there will be more supply even if demand remains the same. Prices will go down.

All else being equal of course...
Yes, after some more reading, the supply side increase explains the drop in prices. Thanks!

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