10-year Treasuries at 4.61% — MMFs trailing by ~100bp at 3.6%.
Breakeven inflation priced at 2.2%, real yield 2.4%.
That's a decent real return if you believe:
• Inflation stays anchored near 2%
• Fed holds or cuts gradually
• No major growth shock
But if inflation re-accelerates or we get a hard landing, that 2.4% real yield won't look so great. And locking in 4.61% for a decade while MMFs still pay 3.6% with full liquidity? You're giving up optionality.
I'd rather stay short-duration here. Curve's still inverted, macro's messy, and the risk-reward on long bonds isn't screaming at me yet.
Not saying it's a bad trade — just not my trade right now.
Breakeven inflation priced at 2.2%, real yield 2.4%.
That's a decent real return if you believe:
• Inflation stays anchored near 2%
• Fed holds or cuts gradually
• No major growth shock
But if inflation re-accelerates or we get a hard landing, that 2.4% real yield won't look so great. And locking in 4.61% for a decade while MMFs still pay 3.6% with full liquidity? You're giving up optionality.
I'd rather stay short-duration here. Curve's still inverted, macro's messy, and the risk-reward on long bonds isn't screaming at me yet.
Not saying it's a bad trade — just not my trade right now.