Well, there's the answer to the question "who will buy the coming flood of treasury issuance."
All you need is a yield that's high enough i.e. a clearing price that's low enough and the primary dealers can't keep them in stock and go begging Janet Yellen to issue some more.
Plus, when the time comes, the Fed will be able to start buying some of the high-coupon stuff and get both their average duration and their average price back into a profitable position.
From Bloomberg via Yahoo Finance, October 3:
The US 30-year yield rose to the highest level since 2007, deepening a bond selloff driven by expectations the Federal Reserve will keep interest rates elevated as the supply of Treasury debt grows. Shorter-term yields also reached new highs.
The 30-year Treasury yield rose as much as 8 basis points to 4.869%, exceeding its 2010 high of 4.8559%. Shorter-maturity Treasury yields had previously reached the highest levels since at least 2007, and extended their climb Tuesday.
While supported by expectations that the Fed may raise rates again — a prospect endorsed by Loretta Mester, president of the central bank’s Cleveland branch in comments last night — and by the removal of the threat of an imminent federal government shutdown, the magnitude of the selloff continues to flummox experts.
It’s broadly indicative of investors scrapping bullish bets, JPMorgan Chase & Co. strategist Jay Barry said in a note late yesterday.
“We have been concerned that the position and hedging technicals could be an ongoing negative for Treasuries,” Barry wrote.
The rise in nominal yields has coincided with an increase in inflation-adjusted yields. The 10-year real yield approached 2.4% Tuesday, extending a climb from below 2% over the past month. The 30-year real yield rose to 2.46%, up 7.6 basis points.
“Real yields on the long end just have further to go — the pace of inflation falling is not satisfactory enough for the market, and the Fed’s framework for getting inflation lower is to slow the economy, and that’s not exactly happening to the market’s satisfaction,” said John Brady, managing director at RJ O’Brien....
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The 10-year Treasury futures are priced to yield 4.7640%, down a bit from the day (week, month, year, decade) high of 4.7720%.
And quite a ways away from the 2006 - 2007 double top over 5.00%
