US Treasury’s On Pace For WORST Quarter Since 2016

Much has been written about the ‘death of 60/40’ portfolios and of the bond bull market, generally speaking.

Setting aside what I think MIGHT happen into the future for a moment, market performance thus far in 2021 has put an exclamation point on some of the more popular bond bearish arguments and there is  NO denying it.

Bloomberg Barclays Treasury Index {LUATTRUU } Quarterly %age Return

(click HERE to enlarge visual)

With THAT in mind, here is the latest from MarketWatch’s Sunny Oh:

Market Extra

U.S. Treasury debt markets on pace for worst quarter since 2016

Published: March 29, 2021 at 3:02 p.m. ET

By Sunny Oh

The 10-year Treasury yield has climbed around three-quarters of a percentage point so far this year

The sweeping selloff that took apart long-term government bond markets since the start of the year has shocked even the most bearish of traders.

Many analysts had agreed yields were destined to head higher as the U.S. recovery moved forward, but few had penciled in the magnitude of the increase that has saddled bond investors with painful losses in their portfolios.

…“The guys I talked to were prepared to go shorter duration, and were prepared for a yield rise. Still, the move [this quarter] even surprised some who were bearish in the shorter-term,” said Steve Feiss, managing director of fixed income at Etico Partners, in an interview.

Let’s be honest. January 5th informs a lot of price decisions [in the bond market] today,” he said, referring to the day of the Senate runoff elections…

…Still, the bond bulls say the Treasury-market tantrum of 2021 may struggle to press forward from here.

They hold doubts around the long-term economic boost from the stimulus funds, and point out the structural forces keeping rates pinned down aren’t going anywhere, said Feiss.

As you can see in the VISUAL ABOVE, the last time bonds registered a quarterly return nearly as bad as Q1 2021 will, was just after BREXIT and Trump’s election (2016). Digging deeper than THAT, you’ve got to go back TO Q3 1980 when bonds returned -4.58%. One thing these instances had in common were quarterly returns that were POSITIVE in the following quarter.

Is NOW the time to abandon bonds and the concept of rebalancing? Will this time be different? For these answers and more importantly, what it all means for you and your allocation, I highly recommend you consult with your Etico Partners financial associate for more on how this relates to you and your specific situation.

Steven J. Feiss

Managing Director, Fixed Income

Etico Partners, LLC

1795 Rout 9 Clifton Park, NY 12065

Office: (732) 683-9222
Mobile: (914) 450-9668

Meet the Author

Financial markets veteran with more than three decades of experience working with high profile, domestic and international asset managers and trading desks, producing customized and actionable solutions for strategic alpha generation and risk mitigation. Author of a unique daily (6x per week) cross-asset macro market commentary (the BondBeat) to inform and assist INSTITUTIONAL FIXED INCOME investors and trading desks.