There’s more pain in store for the bond market. Here’s why.

00:00 Speaker A

More pain may be in store for the bond market at the hands of the Fed’s fresh interest rate hike. If history is any guide, think 6% on the US Treasury yield up from the already worrying level of about 5% or so today.

00:13 Speaker A

6% may be the new 5% breaking point for stocks. Historically, the 10-year US Treasury yield has risen about 50 basis points or bips on average in the first six months after the Fed began hiking rates when looking across tightening cycles dating back to 1963, per analysis from the Kobeissi letter.

00:35 Speaker A

Over the following 12 months, the average increase in yields reached roughly 110 basis points. If this trend happens again, the 10-year yield would surpass 6% next year for the first time since August 2000.

00:50 Speaker A

That was the year I graduated high school, and I wasn’t even looking at yields. The most extreme cases, the strategist found, saw increases of up to 400 basis points in the 10-year yield over the 12 months following the initial rate hike.

01:03 Speaker A

On the other hand, some declines of up to 70 basis points were also recorded during the same period. Surging US Treasury yields have already started to spook stock investors, and by the time the 10-year yield would hit 6%, markets could be quite in the tank.

01:18 Speaker A

Expect more meaningless bond buying from the Treasury Secretary, uh, Scott Beson very soon. This is one freight train he will find doesn’t respond to him holding out his hand and yelling, ‘Stop, please.’