Treasury market volatility feels like pandemic-era 2020

investmentnews.com:

The Treasury market is serving up levels of volatility last seen during the pandemic-era turbulence of March 2020.

The U.S. 30-year yield shifted by almost 13 basis points a day over the last five trading days, the highest in more than three years and more than three times a much as the daily average over the past decade. The yield jumped five basis points on Tuesday in Asia as traders gird for fresh volatility.

The large swings pose a challenge to investors reckoning with the highest yield levels in more than a decade. They also underscore the dangers for traders drawn in by expectations the Federal Reserve’s hiking cycle may spur a recession, even as a surge in US bond scales sparks concern about the risks of holding longer-dated debt. Hamas’s strike on Israel and an expected ground offensive into the Gaza Strip are also adding uncertainty. 

“When you have very inverted curves, and then they move back to more normalized curves, that’s historically the best time to buy bonds,” said Scott Solomon, a portfolio manager at T. Rowe Price Associates, Inc. “However, we’re still concerned about rising yields. There’s still a ton of supply coming from the US.”

The yield on the 30-year bond topped 5% this month for the first time since 2007, reflecting anxiety about a sustained tightness in Fed policy. A poor reception for a bond auction on Oct. 12 also highlighted skittishness about the increasing supply of Treasury debt. However, yields posted three steep declines last week as the threat of a broadening Middle East war fueled demand for haven assets.

The price of the U.S. 30-year bond jumped up and down by at least 2% over the last five trading days, the first time that’s happened since November 2020. An index of longer-dated