Markets March 27, 2026

The Worst Bond Week Since 2024 Is Also When Pension Funds Buy $13.8B

The US bond market just logged its worst auction week since May 2024. Three consecutive auctions, the 2-year, 5-year, and 7-year notes, all cleared at yields above pre-sale levels, marking a treasury auction failure across the board not seen in nearly two years. Bloomberg noted it was the worst three-auction showing in a month since May 2024. Oil-driven inflation fears, a deficit at 5.8% of GDP, and $10 trillion in debt maturing in the next 12 months are converging at once. Goldman Sachs data shows pension funds buying stocks at $13.8 billion before quarter-end, larger than 97% of all monthly purchases over the last three years.

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A Nobel Laureate Called It Treason and a Senator Called It Mind-Blowing Corruption

US Treasury Building, Washington DC – Source: Bloomberg

How US Treasury Yields Got Hijacked by Oil

Treasury Yields vs WTI Crude Oil Futures – Source: Bloomberg

US treasury yields have tracked crude prices point-for-point since US military action began February 28. WTI near $100 pushed yields up. Trump’s ceasefire signals on Monday pulled them back. His escalation threats Thursday sent oil up 5% to nearly $95 and US treasury yields right back up with it, the 10-year landing around 4.36%.

Treasury 2-Year Auction Result vs When-Issued Yield – Source: Bloomberg

That oil-inflation link is what has been emptying the auction books. Traders who fully priced in two Fed cuts by year-end as recently as late February now price in zero, with a small chance of a hike appearing in markets.

David Robin, interest-rate strategist at TJM Institutional Services, said:

“Today’s auction was unfortunately brought to market in a very difficult, unsettled, unsure period. Why commit? Risk-reward is heavily skewed to risk versus reward.”

Gennadiy Goldberg, head of US interest rate strategy at TD Securities, said:

“Reasons to be optimistic about the seven-year auction may be tough to find. While yields remain attractive, poor demand for the two- and five-year sales are likely to keep investors cautious.”

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Pension Funds Are Buying Stocks Into a Broken Bond Market

Monthly Equity Pension Estimate chart – Source: Goldman Sachs

Around $3.5 trillion in S&P 500 market cap has been wiped since the Iran War began. Pension funds buying stocks into this is one of the more striking parts of the story. Goldman Sachs puts the $13.8 billion estimate above 93% of all monthly purchases going back to January 2000. Since 2000, pension funds have averaged selling $1.8 billion per month in equities.

S&P 500 market cap heatmap with broad losses – Source: X

The rebalancing logic is simple. Stocks fall, the equity allocation drops below target, so bonds get sold and equities get bought to restore the ratio. That adds another wave of selling pressure to the US bond market at the worst possible time.

The fiscal backdrop behind all of this is a treasury auction failure story in its own right. The US deficit to GDP ratio sits at 5.8%, nearly double the 3% stabilization threshold and well above the 50-year average of 3.8%. Net interest costs hit $1.05 trillion, clearing the defense budget for the first time. With $10 trillion rolling over in the next 12 months, the US bond market has very little margin for the kind of week it just had.