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I’ve spent most of my career watching bond markets. I’m an old bear bond guy, and I speak in bips, so when something doesn’t add up in Treasurys, it gets my attention fast.
Right now, we’re seeing something that frankly doesn’t make sense — and it’s not just in bonds, it’s showing up in gold too. It’s the kind of behavior that makes you question whether the rulebook still applies.
The Treasury Market Isn’t Acting Right
The action in the 10-year Treasury is really confounding to me, and here’s why: With the war going on, you’d think there’d be a safe haven rush into the dollar or into the Treasury market.
That’s how it’s supposed to work. War breaks out, fear spikes, and capital flows into U.S. Treasurys and the dollar — it’s one of the most reliable patterns in finance.
Except you’re not seeing that. The expected safe haven bid just isn’t materializing the way it should, and that tells me something fundamental has shifted.
Maybe it’s years of quantitative easing that rewired market plumbing, or maybe it’s competing macro forces like stagflation fears overwhelming the flight-to-quality impulse. Whatever the cause, the ground underneath traditional hedging strategies is moving.
Part of what’s happening is simpler than people want to believe — we’re in an environment where institutions are reducing exposure across the board. It’s not a reverse flight to safety, it’s a sell first, ask questions later mindset as big players get smaller and tighten up risk.
That kind of blanket position reduction distorts signals and weakens the usual relationships between asset classes. On top of that, there’s a growing sense that the backstop markets relied on for decades is fading, and confidence in the Federal Reserve stepping in to calm things down has eroded.
The so-called Fed put looks increasingly absent, and that changes the psychology of hedging and risk management in a big way.
Gold Isn’t Following the Script Either
The same confounding behavior shows up in gold. The action in gold is unusual given the war premium you’d expect to see baked into prices, because normally geopolitical tension sends gold higher as investors seek refuge.
But the price action doesn’t match that narrative right now. Does that mean gold is a bad play? Not necessarily — it’s a buy-the-dip moment, but the timing question is trickier than usual.
When do you pull the trigger on that dip when the traditional signals aren’t firing correctly?
Some traders rely heavily on technicals to guide those decisions, and that’s a sound approach. I’m more amorphous — I wait until I feel it in my bones, and while that might sound imprecise, after decades in markets, sometimes the gut check matters as much as the chart pattern.
The larger point is this: If you’re building a portfolio assuming bonds and gold will cushion equity weakness the way they have historically, you need to rethink that assumption.
The playbook is changing, and the relationships you’ve relied on for years may not hold in this environment. Stay flexible, stay alert, and don’t assume safe havens will save you just because they always have before.
Talk soon,
JD
The Rational Trader
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P.S. The Triple Witching Event Is Set to Spin the Options Market Today!
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The show starts at 1 o’clock sharp…
