At least one major Wall Street analyst is betting that Federal Reserve chairperson Janet Yellen will spur a major bond selloff tomorrow when she testifies before the Senate Banking Committee.
The rationale for the bearishness is that Yellen will try and prepare the markets for a rate hike coming in March. From MarketWatch:
Albert Edwards, market strategist at Société Générale and noted permabear, expects Yellen, who is set to deliver semiannual testimony to the Senate Banking Committee on Tuesday, will trigger a steep bond selloff by talking up the possibility that the central bank will raise interest rates in March.
Edwards even referred to the St. Valentine’s Day Massacre in his analysis, comparing the potential downturn to the famous Chicago bloodbath.
While that’s quite a bit of hyperbole, an unexpected rate hike — or simply the insinuation of one — would surely roil the normally mundane bond markets on a short-term basis.
The Fed last raised interest rates in December. Since then, geopolitical uncertainty has risen quite a bit, which makes many market watchers think the Fed will hold off on another boost for quite some time.
The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ:TLT) was trading at $120.34 per share on Monday afternoon, down $0.42 (-0.35%). Year-to-date, TLT has gained 1.02%, versus a 4.12% rise in the benchmark S&P 500 index during the same period.