Renowned bond bull Steven Major of HSBC Holding Plc has admitted to underestimating the negative investor reaction to the increasing US debt and bond supply. In a recent interview, Major acknowledged that deficits do matter when combined with an inverted yield curve and the absence of a recession. HSBC has revised its year-end forecast for US 10-year yields to 3.50%, reflecting the impact of the rising rates, which have reached a 16-year high [9750df91]. However, Major remains optimistic about the bond market and predicts that yields will eventually fall to 3% by the end of next year. He believes that once the economy worsens, it will have no problem absorbing the increase in bond supply. Major also suggests that the current rise in bond yields may make his earlier bullish views more likely to be correct [d8ab9510].
This admission of error by Major, who is known for his accurate bond predictions, has caused bond bulls to reassess their positions. The bond selloff resulting from the increasing US debt and supply has had a significant impact on the market. Bond yields have risen as a result of the fierce tightening of financial conditions. Major's revised forecast reflects the changing dynamics in the bond market and the need for investors to consider the implications of heavy debt supply [f4770c69] [b4711c1c].
Despite his recent mistake, Major's long-term outlook for the bond market remains positive. He believes that the bond market will be able to absorb the increase in bond supply once the economy weakens. Major's track record of accurate predictions, including correctly forecasting a drop in 10-year Treasury yields in 2014, lends credibility to his optimistic views [d8ab9510].
Overall, the acknowledgment of the mistake by Steven Major highlights the importance of considering the impact of increasing US debt and bond supply on the bond market. It serves as a reminder to investors to reassess their positions and adjust their forecasts accordingly. The bond market is currently experiencing a period of volatility, and it will be interesting to see how it evolves in the coming months [9750df91] [d8ab9510].