On Wednesday, plenty of bond-market bears could claim vindication when the 10 year Treasury yield briefly topped 4% for the first time in more than a decade.
The option could be exercised for a profit thanks to the bond-market milestone, but denizens of finance Twitter pointed out that a fictional option trade by one of the main characters from the television series Industry would have gone in the money trader parlance.
Fans of the show may remember that character Harper Stern, a young Black woman fighting for a job at the fictional investment bank Pierpoint Co., convinced a client during a dinner in the show's inaugural episode to purchase an option contract on a $500 million slug of 10 year Treasury notes that would have paid off if the yield topped 4%.
Although her colleagues spooked at her original pitch, Stern argued that Treasury bonds were due for a massive selloff as foreign buyers of U.S. debt backed away from the market due to tensions in the South China Sea due to the U.S. administration's aggressive behavior.
She stood firm in the face of pushback from her colleagues, and eventually closed the trade, one of her first pieces of major business at the bank.
If you think the house is burning down, this is how you monetize it, said Stern, played by actress Myha la Herrold, to infamous Pierpoint client Nicole Craig, played by Sarah Parish during her original pitch.
The option, which covered half a yard trader parlance meaning $500 million of notional value, was sold by Harper in the end of the show's fictional universe, so there is a chance that Pierpoint Co. would have been on the hook for the payout, unless the bank laid off the risk on another client. Many of these details were glossed over in the show.
Since at least 2018, plenty of real people have been anticipating that the 10 year yield will top 4%, including JPMorgan Chase Co. JPM, CEO Jamie Dimon, who has been calling for the 10 year yield to reach that level since 2018.
The 10-year yield TMUBMUSD 10 Y, topped 4% briefly early Wednesday, but quickly fell below that level. It was trading down 21 basis points at 3.753% Wednesday afternoon after the Bank of England announced it would intervene to calm the volatile gilt market.
Since the beginning of the year, bonds have been selling hard, due to the tightening of global monetary policy undertaken by central banks like the Federal Reserve.
The yield on the 10 year note has risen by roughly 2.5 percentage points since the start of the year through Tuesday, according to Dow Jones Market Data. The U.S. government bond market is facing its biggest year-to-date decline since 1981.
For the first time in more than 70 years, global bonds have fallen into bear market territory this year, according to Deutsche Bank.
According to Deutsche Bank, global bonds are the first bear market in 76 years based on two centuries of data.