After the Hamas attack, the rush to safety faded fast
Geopolitics vs supply overhang
The horrific Hamas attack on Israel on 7 October initially triggered the standard geopolitical playbook across trading desks: an instinctive flight to safe-haven assets, bidding up gold, crude oil, and US Treasuries. Yet within forty-eight hours, the sovereign bond rally evaporated, and long-term Treasury yields resumed their relentless upward march. Even the threat of a wider Middle Eastern war could not overcome the structural supply overhang in Treasuries.
The Vanishing Safe Haven
Historically, geopolitical shocks offered a dependable duration hedge, driving yields lower as investors sought shelter in sovereign paper. Today, however, with the US Treasury flooding the market with debt to finance historic deficits, allocators are unwilling to warehouse sovereign duration even during geopolitical emergencies. The structural reality of fiscal supply has overwhelmed transient safe-haven bid dynamics.
When even the outbreak of major war cannot generate a sustained bid for US Treasuries, fixed-income markets have sent an unmistakable signal: duration risk has overwhelmed the safe-haven trade.