Strikes and Shutdowns and Bond Yields, Oh My!

The stock market held up surprisingly well today under the circumstances: The UAW strike is shutting down more auto production. The federal government is heading toward a shutdown on October 1. Moody’s Investors Service warned in a note today that a US government shutdown would be a “credit negative” event for the country. The 10-year Treasury yield surged by more than 10bps to 4.55%, the highest since 2007 (chart). The TIPS yield rose to 2.18%.

On August 2, when the 30-year Treasury bond yield was 4.16%, billionaire investor William Ackman said his hedge fund had placed a bet against the bond. His Big Short is working out very well as the yield rose to 4.65% today.  He expects the yield to rise to 5.00%-5.50%.