- Move past 4.75% may set disorderly selloff in motion
- Traders are pushing back bets on start of Fed easing cycle
The Treasury market is nearing levels that risk triggering a large selloff, pushing yields on 10-year bonds back to 5%, according to Vanguard.
“We are in a danger zone right now,” Ales Koutny, head of international rates at Vanguard, said in an interview. Even a small move higher — past the critical 4.75% level — could force investors to abandon their bets on a rally, giving way to a wave of selling that could push yields toward the highs of 2007, he said.
Investors had piled into Treasuries late last year, betting on a swift easing cycle from the Federal Reserve. Still, as incoming data has pointed to persistent strength in the US economy, the market has turned against them.
Many are being forced to sell off their holdings to limit losses, said Koutny, who helps manages Vanguard’s $1.7 trillion in active assets.