US 30Year Yield reaches 2007 High
The US 30-year yield rose to the highest level since 2007. This week's Treasury selloff came after US lawmakers managed to avert a government shutdown, prompting traders to increase bets that the Federal Reserve will raise rates in November.
Hedge funds have now built the largest short position in U.S. Treasuries in history
Source: DB, barchart
The new safety trade
-> An incredible $993 billion has gone into money market funds since the Fed started raising rates in March 2020. Inflows to money market funds are well ahead those seen in 2015, 2004, 1999 and 1994 rate hike cycles. Why take risk on your "safety" trade when you can make 5% risk-free? Source: The Kobeissi Letter
Asset class and style returns by JP Morgan
As bonds and stocks fell simultaneously, commodities were the notable outperformer in Q3, returning 4.7% and echoing the market dynamics of 2022. Source: JP Morgan
US 10y yields keep rising with most of the increase is due to the rise in real yields. US 10 year yields is now at 4.65%, 10 year real yields at 2.29%
Source: Bloomberg, HolgerZ
The US Bond Market has now been in a drawdown for 38 months, by far the longest bond bear market in history
The US Bond Market has now been in a drawdown for 38 months, by far the longest bond bear market in history
The S&P’s price has diverged from the trend for EPS estimates recently
The rise in bond yields probably explains this dichotomy
Is the golden era of 60/40s coming to an end?
And if equities / bonds correlation stay positive, which asset classes should be added to portfolios? hard assets and commodities? alternatives (private debt, private equities, etc.)? cash on an opportunistic basis? Source chart: Tavi Costa, Bloomberg
