Revisiting the Bond Market - John Rothe | Portfolio Manager, Quant, Tech Geek, And Sometime Superhero To My Kids

Revisiting the Bond Market

ARTAIS FundOn my 12/16 post, titled Bond Yields Are Too High,  I said bond yields were too high and needed to be watched for a key reversal. The long term pattern of the iShares 20+ Year Treasury Bond Fund, “TLT”, was still intact and was approaching its long term trendline.

I had previously said

“Most likely money is shifting from bonds to equities as the Federal Reserve has hinted that their focus is a strong stock market – not lower bond yields. (however the Feds main tool is to buy US bonds to stimulate the economy). At some point the bond market will snap back quickly as investors realize the Fed will be keeping rates at historic lows for possibly years to come and will continue to stimulate the economy by continuing to purchase US Treasuries.”

Also, I mentioned:

“Currently the 10 year bond yield is approximately 3.5% while inflation is at 0.8% and unemployment is almost 10%. In the past 50 years the yield on bonds has never been this high when compared to today’s inflation and unemployment rates. In the past, when bond yields where at 3.5%, inflation was closer to 1.5% and unemployment was about 6.5%.”

Fast forward to today: TLT is now at its long term trendline. Investors are no longer focused on the Fed, instead they are looking at the disruption in the Middle East and how it may effect oil prices and global stock markets. US Treasury bonds are typically viewed as safe haven investments for investors around the world. I would expect to start seeing inflows into US bonds as global investors look to lock in recent stock market gains while they wait to see what happens in the Middle East.

ARTAIS Fund


Comments are closed.