Bonds lose their safe-haven status
The bear case presented for US long-duration bonds is that they no longer function as a reliable safe haven during geopolitical crises due to structural inflation and high fiscal deficits.
The argument
The speakers argued that unlike historical crises where bonds rallied, the recent Middle East escalation triggered a sell-off in long bonds. With US deficit-to-GDP at 6% and sticky commodity-driven inflation, the structural incentive to hold long-dated US debt has broken down.
The thesis, stress-tested
✓ What validates it
- ✓Continued rise in long-end US Treasury yields during periods of geopolitical escalation
- ✓Widening fiscal deficit data releases
▸ Risks discussed
- ▸An extreme, deflationary global equity liquidation could still trigger a temporary flight-to-safety rally in bonds
Hear it yourself
"But even when you just try to isolate for that momentum, it's still, like, a very significant sell off in in US bonds relative to historical norms, which is where it's typically at this rally."
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