BofA Urges Caution as Warning Signs Point to a Bond-Market Tantrum
- Divergence of risk assets, real rates preceded past episodes
- ‘A compelling reason to be cautious duration,’ says BofA.
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Soaring stocks, rallies in the financial sector, tightening credit spreads, and a drop in volatility -- all accompanied by a decline in real interest rates. That’s the story of the market since the last Federal Reserve hike in December.
Strategists at Bank of America Merrill Lynch are left with an unwelcome feeling of deja vu. The last time we saw this confluence of events was right before bond-market routs in 2013 and 2015, the so-called taper tantrum and bund tantrum.