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2021: Tsy Negative Returns Call, 5th On Record

US TSYS
Bloomberg's chief US rates strategist Ira Jersey posits "Treasury returns in 2021 could be negative for only the fifth time since index inception."
  • If our base scenario is realized and the curve bear-steepens, even on a relatively modest basis, long bonds could lose 18% in total return.
  • The front end, however, would experience a very small negative total return. Such moves could see the Bloomberg Barclays Treasury Index fall more than 3%, perhaps approaching the worst annual loss on record.
  • As yields rose in past interest-rate cycles, coupon income was able to absorb much of the price decline of bonds. However, with yields so low, there's little margin for error.
  • On a risk-weighted basis, the possible curve steepening would still cause the long end to underperform, and the belly (read five-year sector) would still do better than long maturities.
BulletMarketsFixed Income Bullets
BulletMarketsFixed Income Bullets

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