Bond Market Rocked As 10Y Yield Soars Most In Two Years

One day after a powerful, short-squeeze driven rally in US Treasurys, as a flight to safety pushed investors out of tumbling stocks and into the "safety" of bonds on Thursday, Friday has seen a dramatic U-turn, with the 10Y yield surging from a low of 2.54% to as high as 2.6712%...

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... a 4.2% increase, which was the biggest one-day percentage gain in the 10Y yield in two years, or since a 4.5% jump in the 10Y yield on January 18, 2017.

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What is remarkable about today's TSY selloff is how coordinated it has been across the entire curve, which shifted almost entirely in parallel, with 2-year yields similarly rising the most in over a year as the market's fascination with imminent rate cuts was put on the backburner.

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The rebound in yields has pushed all tenors from 2Y to 5Y back above the 2.40 effective Fed Funds rate, a level all three TSY dipped below during yesterday's violent rally. This comes as bats on a rate cut in 2019 have faded modestly despite today's somewhat dovish comments by Powell which contrasted with the strong payrolls report.

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Ironically, the violent reversal comes just days after investors plowed a near-record $1.7 billion into the IEF iShares 7-10 Year Treasury bond ETF...

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... and comes at a time of record government bond inflows.

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