Safe Haven Demand Will Persist: Larosiliere

US Treasuries rose on Thursday as a selloff in US technology shares revived demand for bonds as a hedge against possible economic slowdown. The report gives no yield changes or market-move magnitudes.

Analysis

The key question is whether Treasuries are hedging a genuine growth shock or merely absorbing short-term risk-off flows. If the technology selloff remains concentrated in valuation or company-specific concerns, bond demand may fade once positioning resets; it does not by itself establish weaker aggregate demand. If it broadens and is confirmed by softer labor or activity data, the rally has a more durable macro basis. The hedge may also be less reliable if inflation expectations or Treasury supply keep term premiums elevated: growth-sensitive equities and long-duration bonds can then stop moving inversely. Over the next 1–3 months, watch whether yields remain lower after incoming data and whether breakevens rise or fall alongside nominal yields. A persistent decline in real yields would support a growth-scare interpretation; rising breakevens would argue that the rally is mostly a flow event. With no evidence here on positioning, curve moves, or macro confirmation, this is not enough to justify chasing broad duration. Over 6–18 months, the relevant question is whether slower growth or inflation/supply constraints dominate the bond hedge—not the technology selloff alone.

Key Decisions for Investors

• Do not add outright duration solely on this session’s risk-off move. Treat it as a signal to monitor, not confirmation of a growth downturn.
• Conditional trade: add a measured long in intermediate Treasury futures only if yields hold their decline through upcoming labor and activity data and real yields fall. Define the exit by a reversal in yields alongside stabilizing growth data; no entry level is supportable from the information provided.
• Track the cross-asset confirmation: broadening equity weakness plus falling real yields and softer activity would strengthen the duration case. Rising breakevens or a quick yield reversal would falsify it and favor reducing the hedge.
• Avoid assuming Treasuries will reliably offset technology exposure in a renewed inflation or supply-driven selloff; reassess the hedge if nominal yields rise while equities remain weak.