U.S. Bond Market – If There’s a Time to Panic… It’s Now
Jun 11, 2013
I received several letters from readers concerning my recent column opining that the 30-year bull market in bonds is over.
Some asked if it was really that big a deal that bonds fell by 2% in May. The answer is yes. It is a big deal, especially when 10-year Treasurys yielded just 1.7% a month ago. That slight sell-off erased more than a year’s worth of interest.
The paltry income from these bonds is why longtime credit analyst Jim Grant says Treasurys offer “return-free risk.”
Of course, some say the bonds could rally 2% from here and investors would be made whole again. It’s possible, but how likely is it? Successful investing is about analyzing probabilities not possibilities.
With the economy improving, commodity prices (including gold) down, the dollar up and the stock market strong, more investors believe measly yields that offer safety from the storm is not what they’re looking for.
Many of them are moving money out of their vulnerable bond funds and moving them into investments with more total return potential.
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