Big Treasury Selloff Leads To New Bond Bulls In The Making — Investors Look To Snatch The Biggest Opportunity In Years

The recent summer selloff in U.S. Treasury debt is being hailed as a golden opportunity for bond investors, providing the most attractive buying window in years, reports The Wall Street Journal. The Federal Reserve’s tightening policy, coupled with a resilient economy, has driven yields to their highest since the 2008 financial crisis.

Matthew Nest of State Street Global Advisors, stated, “We know there’s a debt problem. It’s unsustainable, and it’s at the heart of the bond market right now.”

Nest, like many other bond bulls, is banking on the increasing U.S. debt to slow economic growth over time, leading to a debt-market rally that would benefit bondholders buying now.

The 30-year Treasury yield recently hit its peak since 2011, closing Friday at 4.379%, up from 1.2% in 2020. The 10-year counterpart traded at its highest rate since 2007, pushing mortgage rates to their highest in over 20 years.

However, not all investors share this optimism. There is a belief that federal spending and dampened demand from America's largest foreign creditors may keep long-term rates high for years. Despite this, the U.S. economy has so far managed to withstand the Fed rate hikes, surprising investors who had predicted a recession.

The government’s borrowing explosion to fund Covid-19 stimulus packages, coupled with the Treasury’s ambitious plan to refill coffers post the debt-ceiling standoff, has unnerved many investors, pushing them to consider the era of low rates as a thing of the past.

Despite these concerns, some investors maintain a positive outlook, contending that the potential returns on bond purchases are real, while the worst-case scenarios are just speculation.

Read Next: Week In Review From Global Giants India Push To Adani Groups Highs And Lows

Photo by Thomas Barrat on Shutterstock