Earl Davis, who runs fixed income and money markets at Bank of Montreal's asset manager, told Bloomberg Television's Surveillance that the 30-year reaching 6% is "inevitable," with the odds high it happens in October. His view hinges on a simple pattern: when markets fixate on a single driver, they can amplify moves. Right now, he said investors are "actually focused on the interest rate," and that focus, paired with volatility, is fueling higher yields.
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Yields have been surging across the curve, and the long bond is up by almost 50 basis points from the end of August. On Monday morning, 30-year Treasuries climbed to 5.65%, nearing the 5.69% peak from Oct. 1, a level last seen in 2002. Davis framed the selling as part of a global move, not just a US story. He also noted that bonds fell after Friday's softer-than-expected payrolls report, a reaction he said reinforces that traders are prioritizing rates themselves over the near-term path of Fed hikes. Or as he put it, "We're in a bear trend, not a bear market."
Davis flagged two potential turning points for Treasuries. One catalyst would be Democrats winning both the House and the Senate, producing a divided, gridlocked government and refocusing markets on growth rather than inflation. The other would be officials stepping in if the 30-year breaks 6%, with Davis saying intervention would mean "buying up bonds," and the Fed and Treasury working together in a way he called "QE without a doubt." He also warned that should the 30-year move past 6%, the US could slip into a debt trap where nominal growth lags the government's borrowing rate, setting off a self-perpetuating rise in debt-servicing costs.
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