29 Aug 2013
Flash: Sell-off in US Treasurys has days numbered - HSBC
FXstreet.com (Barcelona) - In view of HSBC Strategist Steven Major, the correction in the US bond market may be nearly complete, with further increase in Treasury yields to require a new driver.
Key Quotes
"The term premium priced into the curve, that component of yield not explained by cyclical economic factors, has been driving longer-term US yields. By historical measures, the correction of 2013 has already been a significant one."
"Comparisons with 2003, which also featured a term premium-based sell-off, are more appropriate than with 1994, characterised by a sell-off based on traditional drivers."
"All of the four sell-offs of at least 100bp in the last 10 years have all been term premium-led. This is in contrast with those that took place through 1993-2003, which were more ‘traditional’ in that they were driven by rate expectations and/or inflation."
Key Quotes
"The term premium priced into the curve, that component of yield not explained by cyclical economic factors, has been driving longer-term US yields. By historical measures, the correction of 2013 has already been a significant one."
"Comparisons with 2003, which also featured a term premium-based sell-off, are more appropriate than with 1994, characterised by a sell-off based on traditional drivers."
"All of the four sell-offs of at least 100bp in the last 10 years have all been term premium-led. This is in contrast with those that took place through 1993-2003, which were more ‘traditional’ in that they were driven by rate expectations and/or inflation."