The resistance to further increases in short-term U.S. Treasury yields has become significantly stronger.
After the 10-year U.S. Treasury yield broke above 5.2%, the marginal return from continuing to short has been far lower than the 5%+ stock-borrowing/financing costs required during the short.
When the interest used to be only 1%, a slight drop in principal could wipe you out. Now, the interest you earn by simply holding for a year can withstand a future decline in asset prices of 5%. Even if the market has not yet bottomed, the current odds structure is already significantly in favor of the buyer.
Put simply: it can’t really fall further; the probability of upside is greater than the probability of downside.
After the 10-year U.S. Treasury yield broke above 5.2%, the marginal return from continuing to short has been far lower than the 5%+ stock-borrowing/financing costs required during the short.
When the interest used to be only 1%, a slight drop in principal could wipe you out. Now, the interest you earn by simply holding for a year can withstand a future decline in asset prices of 5%. Even if the market has not yet bottomed, the current odds structure is already significantly in favor of the buyer.
Put simply: it can’t really fall further; the probability of upside is greater than the probability of downside.