Market Talk: Bond yields are now ‘unanchored’

追加: 2026-05-19

[00:00:00]Markets have a bad case of the bond blues and there's no quick relief in sight.

[00:00:07]Global bond markets have suddenly decided it's time to take the Iran war seriously. Rising oil prices, stubborn inflation, and mounting concerns over government borrowing have sent long-term yields soaring around the world. But are today's yields an opportunity to lock in returns or will the sell-off keep running? Well, let's ask Camille de Courcelles, head of developed markets rate strategy and economics for Europe at BNP Paribas Market 360. So, Camille, with 30-year Treasury yields around 5.1% some strategists see scope for a move toward 5.5% levels last seen in 2004. Do you agree? Well, it's hard to pin down to a precise number, but what we would argue is that having broken through that important level, yields are now unanchored. And we like to draw a parallel with 2023. Um so, remember at the time 4% was seen as a strong resistance level and as soon as we broke through it, yields became unanchored.

[00:01:03]And I think we are in the same environment all over again. At the time, it required a non-expected cut of supply by the Treasury to reverse course on 30-year yields.

[00:01:16]But this time, I mean, the last quarterly refunding announcement was not so long ago and yields were already close to that level and yet the guidance was completely unchanged. So, it looks like the Treasury put is probably at much higher levels.

[00:01:33]Is it 5.25? Is it 5.50? Hard to tell. Um but it does show that they are not going to react just yet. I think also what is a little bit concerning is that the latest rise in yields came with a rise in rates expectation and not a rise in term premium in the US or not as much, let's say. So, if we just look at term premium in the US, it still remain very contained. And yet, you still have important risks on the deficit, whether it comes from financing the war, additional defense spending, or ahead of the midterms, there is probably room for more deficit to be to to be used. And so, all together, it means that term premium certainly have still more room to rise in the US. Well, some are arguing that this is the time to cut exposure to bonds in favor of equities. So, how do you think investors should navigate these ugly markets? So, I think of the casualty a little bit the other way around, in the sense that I think we've already we we are seeing ongoing rebalancing from bonds into equities.

[00:02:45]And it's still at play, because if you think about it, um A, the US economy has been a lot stronger than expected.

[00:02:54]Uh AI is still booming, so US equities certainly have very appealing returns.

[00:03:01]And compared to this, you can look at the bond market, where returns are nowhere near this sort of levels.

[00:03:09]And yet, as we were just saying, you still have important risks on deficits, and term premium are still contained.

[00:03:16]So, I think you will need to see term premium rise further, yields rise further for bonds to look appealing again versus the risks and versus equities. Until that, then yes, you can still see a preference for equities.

[00:03:33]Well, markets are now pricing a possible Fed rate hike by early 2027, and growing odds of one even earlier. So, is the debate over rate cuts now ended? Two factors are behind the shift in the debate. One is a stronger US economy, to the point that you could actually wonder whether we are are not already at neutral in terms of Fed policy rates.

[00:03:59]And the second and more important factor is Middle East higher oil prices, much higher inflation as we have seen with the latest CPI and PPI reports.

[00:04:10]So these have clearly a closed the debate on further cuts and it has opened the debate on Fed potentially hiking.

[00:04:19]Well, bond markets have not traded without either actual central bank buying or the threat of it since 2007.

[00:04:24]So with the new Fed chair, Kevin Warsh, known as a critic of quantitative easing, has the market lost its backstop?

[00:04:30]>> I think at the moment it's not a driver, but it's certainly something to watch out for. It could become one in the next months years or quarters. But for now I think it's more the uh, you know, imbalance between supply and and demand that is at play here. That was Camille de Courcelles from BNP Paribas at Markets 360. Don't forget you can watch more videos on reuters.com.