Treasuries are giving mixed signals, but gravity could take hold.
The mantra, “don’t fight the Fed”, has been the trendy tagline to reference high-flying Treasury securities. This is for good reason, the Federal Reserve unleashed bazooka style monetary policy to combat the COVID-19 virus and its economic effects forcing interest rates toward zero.
The masses seem to have accepted the idea of negative interest rates. In fact, they seem to be expecting it. The Fed isn't expected to make any changes to the Fed Funds rate until we get more clarity on the impact of the COVID shutdown. Thus, unless the bond vigilantes take it upon themselves to push short-term rates into negative territory, it might not happen. Also, now that we've seen the idea of negative interest rates become mainstream, the story might finally have run its course. That’s generally how it works; once a fundamental story becomes seemingly obvious, its implications are already priced into markets, and prices generally reverse against generally accepted expectations.