The bond market defies the doomsters

Share this page on:

THE yield on the ten-year Treasury bond fell to 2.13% on August 28th, after North Korea fired a missile over Japanese territory. Investors tend to buy government bonds when they feel risk-averse. That will have come as a surprise to those commentators who have called the bond market a “bubble” that is sure to burst; one British magazine made this a cover story back in September 2001. Every time the ten-year yield falls close to 2%, press references to a bond bubble seem to increase (see chart; the yield is inverted).

It is not just the press. Investors have been cautious about bonds for a while; the vast preponderance of fund managers polled by Bank of America Merrill Lynch in January had a smaller holding than usual in the asset class, just as they did in January 2016. But while inflation stays subdued, and central banks maintain short-term rates at historically low levels, government bonds seem able to attract buyers. Japan’s government bond yields have been very low since the start of the millennium; those betting on a crash in the Japanese market have lost money so often that the trade became known as the “widowmaker”. If the US bond market is a bubble, it has taken a long time popping.

NextHow do you solve a problem like Korea? Investors are unsure
Would you like to share your opinion?
  • I entirely agree (0.00%)
  • I entirely disagree (0.00%)
  • I somehow agree (0.00%)
  • I somehow disagree (0.00%)
  • I have no opinion (0.00%)
  • I don´t care (0.00%)
  • This is bullshit! (0.00%)
Follow mr

Julio Marchi ©

Publisher / Editor at BS News & Media Services
A free thinker, not labelled as anything, not associated with any party, not part of any group or engaged with any religion... A simple guy tired of the nowadays bullshit who decided to promote more serious debates about what is really happening hoping to bring back intelligence to the superficial and shallow news & headlines that unfortunately took over the existing media scene.
Follow mr

Leave a Reply

%d bloggers like this: