Every Bond Bear's Worst Nightmare In 1 Simple Chart

"Everyone" knows that yields have to rise when the Fed tightens, right? With yields so low, "everyone" knows that bonds are the worst investment if The Fed begins to hike rates, right? Wrong! As the following chart from Goldman Sachs shows - over the last 32 rate-hike cycles, 10Y bond yields have compressed after the rate-hike cycle begins... So be careful what you wish for on Fed tightening!

Post-hike, 10Y yields have dropped notably in the next few years of the cycle...

 

We know it's annoying when 'facts' and 'data' get in the way of a narrative that everyone would love to come true... but history simply tells us that mainstream is simply misled and then squeezed on their short bond positions. Simply put, if rates haven't lifted by the time the Fed raises rates (if that ever happens) then they never will and the 'turning Japanese' meme will be proven correct once again.

 

Chart: Goldman Sachs