The return of bond vigilantes could mean it's time to buy the long bond, according to BofA Securities.
The rolling 10-year return from Treasuries (NASDAQ:TLT) (NASDAQ:SHY) (NASDAQ:IEI) (NASDAQ:IEF) is in the same, negative, "humiliating" place that stock returns were in February 2009 and commodities were in June 2018, strategist Michael Hartnett wrote in his weekly "Flow Show" note.
There's now "nothing more contrarian in '25 than being long the long end," he said.
The 2020s bond bear market "is perfectly sensible given 'all hat and no cattle' path of US tariff policy ... the 'DOGE is out, tax cuts are in" Q2 pivot, (and) investor need to hedge risk 'bubble & boom' policies pursued as politically easiest way to reduce debt as % GDP," Hartnett said.
But with bond vigilantes pushing down Treasury prices, there's now a great entry point to buy the 30-year (US30Y), he said.
Bond yields above 5% are "negative for today's highly 'financialized' US economy relative to Rest-of-World, and bond vigilantes are incentivized to punish unambiguously unsustainable path of debt & deficit," Hartnett said.
The magic Treasury yield number is the 5-year (US5Y) at 3%, above which the $1.2T interest payments on U.S. debt grow, below which they stabilize," Hartnett added.
2020s bond bear market (Bofa)
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