Barry Ritholtz posted a nice summary of outlooks (see here for more) on the Treasury market for those of you still trying to figure out where bond yields are headed. My personal opinion is that yields have very little room to move lower in the near-term and are likely to move higher later in the year as the economy either recovers or the Fed implements QE3. This makes for a particularly poor risk/reward environment currently. Bonds are not nearly as attractive as they were 6 months ago….But that most certainly doesn’t mean bonds are in a bubble. I wouldn’t turn bearish on bonds over the long-term until we begin to see clear evidence that rate increases are on the horizon. In short, wait to buy bonds at better prices….Here’s more opinions:
David Goldman
Principal, Macrostrategy.com
“There has been a near-perfect inverse correlation between commodities and term yields, and that shows that the Treasury market is starting to worry about inflation, as well it should. The big commodity-price recovery is bad for bonds. Asian demand will lift commodity prices, so bonds will underperform.”~~~
Jim O’Sullivan
Economist, MarketWatch forecaster of the year, 2011
“It’s hard to get too bearish on bond yields near term, but chances are yields will be up more than down in coming months, if the economy grows modestly.”~~~
David Rosenberg
Chief economist and strategist, Gluskin Sheff
“No. By the time it’s over, the yield curve will have mean-reverted to 200 basis points from today’s 275 basis-point gap. Since the Fed will keep short rates at zero through 2014, the inevitable flattening of the curve will occur via much lower long-term yields.”~~~
Jason Hsu
Chief Investment Officer, Research Affiliates
“It’s anyone’s guess whether Treasuries will move up or down in the next six to 12 months. But the secular yield decline has probably reached its bottom.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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