Treasury Bulls Beware: A Cautionary Tale From Punk'd British Bond Traders

Tyler Durden's picture

Bad data, don't worry, the central bank's got your back; Good data, don't worry, the central bank promised to stay easier for longer and longer (no matter how good things appear from the data). That's the meme that has driven the short-end of the world's largest bond markets to record lows. And then, just as the world's bond traders think they have the central banks understood, the Bank of England drops a tape-bomb...

 

Just when you thought you knew your uber-dovish central bank, this happens:

BoE Governor Carney noted that borrowing costs may rise sooner than economists expected...

 

and Deputy Governor Bean added...

 

"An increase in interest rates will be a symbolic step, because it will be an indication that we are on the road back to normality,"

 

"I would welcome us getting on to the path of normalization, as a demonstration that the economy is healing,"

 

Which produced this... in 1Y Gilts...

 

Coming to a US Treasury market near you soon? We have argued before that the Fed needs volatility to maintain their omnipotence.