Battered Reflation Trade in Bonds Faces More Pain in Fed’s Wake
- Steepener trade ‘may have run its course’: Incapital’s Leary
- More flattening seen with traders anticipating 2022 liftoff
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The abrupt disintegration of the Treasury market’s premier reflation trade may not be done, after bets that the economic revival would drive up long-term yields unraveled at a speed last seen a decade ago.
This week’s hawkish pivot by the Federal Reserve ran into a market that was as short as any point in the past 16 years. The result was a mad scramble to unwind so-called curve steepeners. The position had dominated the narrative for months as investors absorbed the central bank’s signals that it was willing to let inflation run hot as growth rebounded.