Bondmageddon: Don’t Fight the Curve

DoubleLine portfolio manager Ken Shinoda gives a bond market update, describing a selloff in longer-duration Treasuries with the five-year yield back at 5% and the 30-year near levels last seen in the early 2000s. He contrasts the current drawdown with 2022, noting higher starting yields have cushioned losses, and argues the equity rally is narrow and market breadth is at its weakest since the dot-com era. He says he sees the most interest in short-duration, high-quality securitized credit and floating-rate paper.

1. The five-year Treasury yield has moved back to 5% from under 3.75% in April, and the 30-year is near levels not seen since the early 2000s.
2. Treasuries are down about 2.8% this year versus double-digit losses in 2022, which Shinoda attributes to higher starting yields cushioning the damage.
3. He points to short-duration, high-quality securitized credit and floating-rate paper paying 120 to 150 basis points over short Treasuries or SOFR.
4. He flags SpaceX and Oracle trading like below-investment-grade names and French spreads at their widest versus Germany since the 2011-2012 sovereign crisis.