Hedgeye CEO Keith McCullough Draws Parallels Between Current Bond Yields and the 2008 Crash Setup

Hedgeye CEO Keith McCullough explained on Tuesday's edition of The Macro Show why he remains short on long-term bonds as yields hit new cycle highs, pointing to similarities with market conditions seen ahead of the 2008 financial crisis.
The 2-year Treasury yield reached a new cycle high of 4.95% on Tuesday morning, pushing toward the 5.00% threshold alongside a breakout in the U.S. dollar index. Hedgeye tracks both assets daily using its proprietary Risk Range framework.
According to McCullough, the Federal Reserve remains the primary driver of the setup, as the market prices in more rate hikes than justified while the central bank reacts to lagging late-cycle data. Until the bond market finishes adjusting to these expectations, short positions in vehicles like $TLT and $ZROZ will remain active.
"5.29-ish is where bond yields stopped going up in '07, when I started thinking about this pending market crash of 2008," McCullough noted, highlighting the historic long-cycle trajectory that subsequently saw yields drop to 1.39% by 2012.
Category: analysis
Market: bonds