What a bond route looks like: Worst 2 days for the bond market since Lehman

The long bond (i.e. 30 year) went from about 4.25% on Tuesday to 4.5% on Thursday.  That is a huge change in expectations in a very little time.  At about noon when the yields spiked at 4.5% people were in a panic. 

Source Yahoo Finance
See how the yield curve has steepened in the past few days.  The black line is the Yield Curve. The fading "trails" behind the black line show how the yield curve developed over the preceding days.  That represents what the yield curve used to look like. 

Source Stockcharts.com

Via FT:
The yield on 10-year US Treasuries hit a six-month high of 3.33 per cent on Wednesday, up 0.39 percentage points from Monday and 1 percentage point higher than its October low. Japanese five-year yields also rose the most in two years, while Germany’s benchmark borrowing costs hit 3 per cent. “People are getting out of the market and moving to the sidelines, feeling shellshocked at the speed of the rise in yields,” said David Ader, strategist at CRT Capital.
The primary explanation is that growth expectations have increased because of better economic data and the “second stimulus” provided by the US government. But others argue it could be due to fears that the US Federal Reserve will not follow through on asset purchases or because of higher government deficits. “It is probably all three,” said Mr Major.


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