ROSENBERG: Treasuries Are Selling Off, But We've Seen This Happen 8 Times Since 2007

david rosenberg

Photo: WealthTrack via YouTube

Unlike most bears, Gluskin Sheff’s David Rosenberg doesn’t expect a sharp rise in interest rates any time soon.In fact, this call even won him a  bottle of whiskey from Marc Faber,

Recently, rates have been on the rise and Treasury prices have been falling.

But Rosenberg isn’t pulling the plug on his call.

Rather, he thinks this might be a buying opportunity.

From his recent Breakfast With Dave note:

The Treasury market has sold off recently, and the 10-year note yield has already moved up nearly 50 basis points from its nearby multi-decade low (jumping more than 20 bps in less than two weeks).

It was overbought then.  It is oversold now… but let’s not pretend we haven’t seen these hiccups before.  We have had no fewer than eight such episodes of 50+ basis points spasms since yields peaked in the summer of 2007. Each one did not last long and presented a gift of a buying opportunity for patient investors who have an ability to see the forest past the trees.  Typically, these hiccups last 49 trading days and the yield rises an average of 88 bps, with about three quarters of the prior rally being reversed.

Even though this recent setback of Treasuries has exceeded the historical norm in duration and as such a near-term bounce is likely in the offing, recent history suggests it is not impossible to see a move to a 2-2.3% band during this time.

But is this nothing more than a blip in what is still a secular bull market in bonds? Recent history would say yes.


Photo: Gluskin Sheff

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