This Red Alert Is Now Flashing on the Bond Trader’s Radar Screen
- Last time this happened was during biggest sell-off since 2009
- Longer maturity bonds in crosshairs as reflation trade builds
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A bond-market warning light that glowed green for years is suddenly flashing red. The bad news for bondholders is that the last time this happened, it was accompanied by the biggest sell-off since the aftermath of the global financial crisis.
That indicator is the term premium, which, for both Treasuries and German bunds, has snapped back from last quarter’s record lows. The U.S. gauge is now on track for the biggest three-month increase since late 2016.