Jeffrey Sherman on the Treasury Rally, Fiscal Fears and Fading Foreign Demand | Bloomberg

Jeffrey Sherman, Deputy Chief Investment Officer at DoubleLine Capital, evaluates the current state of the U.S. Treasury market amidst global fiscal instability and shifting investor demographics. Recent rallies in Treasuries represent a retracement from oversold conditions and a flight to quality triggered by political unrest in France, where 10-year bond yields have notably surpassed those of the U.S. Despite these short-term gains, long-term fiscal concerns persist, leading DoubleLine to remain underweight or short on the back end of the yield curve. The market faces a structural shift as traditional long-term holders like foreign central banks are replaced by "fast money" hedge funds and a preference for gold. Furthermore, Treasury Secretary Scott Bessent’s interventionist rhetoric and issuance strategies have yet to significantly bolster market confidence or address the waning foreign demand caused by converging global yields and de-dollarization trends.