Stories
Bank of America Warns of 2022 Parallels as Bond Yields Skyrocket
- •Bank of America sees unsettling parallels between current market conditions and 2022, particularly in the bond market.
- •Benchmark 10-year Treasury note yield surpassed 5.2%, reaching levels not seen since 2007, while the 30-year yield hit 2004 highs.
- •Despite rising yields, equities like the S&P 500 and Nasdaq Composite have shown resilience this week.
- •BofA strategist Paul Ciana suggests this could be the calm before a storm, noting similar patterns before the 2022 bear market.
- •Ciana advises investors to consider hedging with put options on the SPY ETF, specifically one- to three-month SPY 750 puts or 750/730 put spreads, though he acknowledges potential risks if yields retrace.
Key Questions Answered
Bank of America notes that yields have skyrocketed to multiyear highs due to elevated oil prices and new U.S. data suggesting the Federal Reserve may need to hike interest rates further to quell inflation. This mirrors 2022 when the U.S. 10-year real yield broke out of a trading range, leading to peaks and declines in major assets along with higher volatility.
The benchmark 10-year Treasury note yield climbed above 5.2%, reaching levels not seen since 2007. Meanwhile, the 30-year bond yield spiked to its highest levels since 2004.
Bank of America strategists suggest that investors seeking protection can scoop up put options on the SPY ETF, which tracks the S&P 500. Specifically, they recommend one- to three-month SPY 750 puts or 750/730 put spreads, where the lower strike corresponds to July lows.
