In our opinion there’s wholly too much handwringing and out-freaking over the bond selloff.
The only ones who should really get freaked out are those wise-guys who thought frontrunning the Fed was a chip shot. The whole curve is getting hammered now, not just the long end.
But as we noted earlier, this selling in bonds is consistent with the increase in risk appetite, as evidenced by the big rally in cyclical stocks.
So when should you get terrified? Well, if growth shows signs of real deceleration, or going negative, and stocks collapse, and bonds are still selling off, then you should be worried about stagflation, or some kind of big shift that somehow markets view the US as a risky bit.
Meanwhile, check out the curve today. Massive widening in the middle.
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