This time it’s the end. Really. Possibly.
It seems like experts have been forecasting the end of the bull market in bonds for years – and they have been doing so. In July 2010, bond guru Bill Gross predicted the 28-year bull market in bonds was near an end and, as interest rates moved higher, bond values would move lower. The Federal Reserve’s first round of quantitative easing had ended in March 2010, and he couldn’t know a second round, which would keep interest rates low, would begin in November 2010.
Since the U.S. election, investors have begun to favor stocks over bonds. Barron’s explained:
“BofA ML [Bank of America Merrill Lynch] said the weekly influx was the biggest into equities since December 2014. The outflows from bonds, meanwhile, was the largest since the taper tantrum of June 2013…The flight from bonds made for the biggest two-week loss in more than a quarter-century in the Bloomberg Barclays Global Aggregate Index, which fell some 4 percent, Bloomberg reports. The outflows from municipal and emerging market bond funds were especially acute, about $3 billion and $6.6 billion, respectively.”
The Wall Street Journal reported the yield on 10-year U.S. Treasuries finished last week at a 12-month high, after recording the biggest two-week gain in 15 years.
Will investors’ enthusiasm for U.S. stocks persist? Will this prove to be the end of the 35-year bull market in bonds? Stay tuned.
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Sources:
http://www.economist.com/news/business-and-finance/21621340-our-coverage-pimcos-ill-fated-decision-bet-bond-markets-bull-run-was-end-bill (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-21-16_TheEconomist-Bill_Gross_Last_Gambit-Footnote_1.pdf)
http://www.barrons.com/articles/has-the-trump-rally-gone-too-far-1479537624?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-21-16_Barrons-Has_the_Trump_Rally_Gone_Too_Far-Footnote_3.pdf)
http://www.wsj.com/articles/treasury-yields-retreat-from-11-month-high-1479483648?ru=yahoo?mod=yahoo_itp&yptr=yahoo (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/11-21-16_WSJ-Rout_in_US_Government_Bonds_Deepens-Footnote_4.pdf)
