Heavy Burden on U.S. Treasurys

Bond markets are the heavyweight bruisers of the financial world: big, powerful and packing a hefty economic punch. But they are also surprisingly nimble and throw unexpected jabs.  Just look at the U.S. Treasury market this year. January saw another big rally in prices, which dragged the yield on the 10-year note down half a percentage point to 1.65%. Prices and yields move in the opposite direction.

But February has seen a big reversal: The yield is back dancing around 2%.  Among longer-dated bonds, in which swings in yields translate into big price moves, holders of debt maturing in 25 years or more who were up 9.6% by the end of January alone have seen year-to-date returns crumble to 3.6%, according to Barclays indexes. Returns include both price moves and interest payments.

That is still better than year-to-date returns for U.S. stocks. The S&P 500 has registered a total return this year of only about 1.2%. And it is far too early to declare that the bond bears, who have long been predicting higher U.S. yields, are finally right.  The Treasury market is still subject to forces that are pulling in opposite directions. And the tug of superlow, if not negative, global yields could pull Treasury yields lower.

WSJ

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