Only A Stocks Crash Can Save Bonds Now, Says Barclays: 'There Is No Magic Level Of Yields'

Global bonds may continue to plummet unless a sustained decline in equities revives the allure of fixed-income assets, says Barclays Plc.

Bloomberg reported these experts suggesting that the only scenario where bonds might rally significantly is if risk assets experience a sharp downturn in the near future.

Analysts led by Ajay Rajadhyaksha at Barclays expressed, “There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally.”

See Also: Federal Reserve’s Anti-Inflation Measures Have Taken A Toll On S&P 500 Profits, Says Goldman Sachs

The recent Treasury rout has sent shockwaves through the global bond market, as investors gear up for borrowing costs to remain elevated for an extended period. Despite the selloff easing on Wednesday, traders remain vigilant for a potential surge in volatility, particularly if the forthcoming U.S. non-farm payrolls data exceeds expectations.

Barclays analysts believe that the U.S. central bank is unlikely to relax its quantitative tightening program, making it a net seller of Treasuries. Additionally, they noted that the rising deficit, leading to an increase in bond supply, is also pushing up the term premium.

The analysts suggested, “The magnitude of the bond selloff has been so stunning that stocks are arguably more expensive than a month ago, from a valuation standpoint.”

They concluded with the assertion that the eventual stabilization of bonds lies through a further re-pricing lower lower-risk assets.

Read Next: Former White House Aide Accuses Trump Of Reserving ‘Worst’ Insults For Women Of Color

Bonds Photo on Shutterstock