Barclays: Bond Selloff to Continue as Fed Stays Hawkish, With No End in Sight for Rising Yields

Barclays strategists believe the recent bond selloff will continue as the Fed stays committed to tightening policy. They don't see a catalyst to stop the "bleeding" in bonds.

Two key factors driving the bond selloff are the Fed's higher for longer stance and rising U.S. fiscal deficits.

Barclays thinks the only way for bonds to stabilize is if the Fed hikes so much it causes a recession and rush to bonds. But they see this as very unlikely.

With mortgage rates near 8% and 10-year yields near 5%, economic weakness may eventually help bonds but not quickly enough.

Barclays believes the path to bond stabilization is through a further repricing lower of risk assets like stocks, which have room to fall just to be fairly valued again.