Major: Treasury Market Is Functioning Normally

Summary

Steven Major argues that the global bond selloff reflects shifting interest-rate expectations rather than US fiscal stress or Treasury market dysfunction. He says persistently high oil prices could force more central-bank tightening, and the dollar could weaken if the US economy cools. He differentiates Japan, where BOJ hikes drive yields higher, from China, where disinflation makes bonds a safety choice, and treats geopolitical anxiety as a new normal.

• Steven Major says higher Treasury yields are driven by a swing from three Fed cuts priced to a hike, not US fiscal dysfunction.
• Treasury swap spreads are not widening, signaling the Treasury market is functioning normally.
• Persistently high oil/energy prices could force central banks including the ECB to hike again.
• The dollar could decline if the US economy cools alongside negative structural and political factors.
• Japanese yields are rising because the BOJ is almost certain to hike.
• China's disinflationary backdrop makes its bonds a safety choice.
• Geopolitical anxiety is now a permanent backdrop that markets have adjusted to.