Treasury rates moved notably higher on Friday afternoon, with the most pronounced pressure concentrated in the 5-, 7-, and 10-year sectors, as the 10-year yield broke out of the trading channel it had held since mid-December. The move appeared to coincide less with speculation around potential Federal Reserve leadership changes, and more with renewed attention on the U.S. Treasury’s quarterly refunding process, particularly the discussion around restructuring the 7-year note auction calendar.
7-year yields rose by more than 5 basis points, compared with a 3 basis point increase in the 2-year, suggesting the move was driven more by issuance considerations than front-end policy expectations. This rate breakout occurred against a backdrop of historically compressed bond and equity volatility, with realized volatility in long-duration Treasurys near levels last seen in 2019.
If yields continue to move higher and volatility begins to expand, implied volatility across bonds—and potentially equities and credit—would likely rise as well, increasing the risk that the current period of sideways consolidation in equities gives way to more persistent choppiness.
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. ...
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
