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Real Yield Surge Above Zero Looks Unlikely To Hold Out

Courtesy of ZeroHedge View original post here.

By Akshay Chinchalkar, Bloomberg Markets Live commentator and reporter

Ten-year U.S. real yields have flipped to positive territory for the first time since 2020. However, staying there though does not have history on its side.

So far this month, real yields are up nearly 50 bps compared to the end of March. A 20-year backtest that measures where they ended three, six and 12 months out after monthly surges of similar magnitude shows that expecting a further climb would have been a losing proposition, as summarized below.

It remains to be seen whether investors will now prefer bonds relative to more risky assets such as stocks and credit as real yields turn positive. With aggressive rate hikes by the Fed now completely priced in, it will take something completely unexpected for real yields to continue marching higher, even after the current, near vertical surge.


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