Bond Market Selloff Deepens as Money Managers Pile Into Cash

Tuesday, September 13, 2016
By Paul Martin

Eliza Ronalds-Hannon
Bloomberg.com
September 13, 2016

Treasuries fell, sending the yield on the benchmark 10-year note to the highest in three months, as a Bank of America Corp. survey showed investors ramping up cash holdings to near the highest in 15 years.

Longer-dated securities, which have been outperforming in recent months, led losses. The difference between yields on Treasuries due in two and 30 years, a gauge of the yield curve, widened to 167 basis points, the most on a closing basis since June 30. Money mangers upped their cash hoard to 5.5 percent, according to the September survey by Bank of America, near the highest since November 2001. A record 54 percent of survey respondents said stocks and bonds are overvalued.

After more than two months of market calm post-Brexit, volatility is surging as concern escalates that central bankers globally are reconsidering the efficacy of extending monetary stimulus that’s driven yields to unprecedented lows. A lack of commitment from central bankers globally to extend their easy money policies threatens bond bulls who face potentially higher interest rates in the U.S. as soon as next week.

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