Bond traders not drinking Yellen Kool-Aid

Shrinking market

The shrinking of the 15-year market will help to support the debt, Satish Mansukhani, an analyst at the bank, has written in reports this year. Nomura Holdings Inc. analysts led by Ohmsatya Ravi recommended bets this month that 30-year debt would outperform 15-year securities.

Banks and other investors, which have also turned to slices of debt known as collateralized mortgage obligations for protection, should start favoring rarer and higher-yielding 20- year securities over 15-year bonds, said Walt Schmidt, a Chicago-based strategist at FTN Financial.

“We’re more in the camp that things aren’t going to move so soon,” he said in a telephone interview. For those concerned that long-term rates are set to spike, “the 15-year market is probably a good place to be.”

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