It seems like all eyes are on stocks as they defy the expectations of the crowd, which has been selling stocks for 5 years now to buy bonds, and make multi-year highs, but the real story may be that the 32-year bull market in bonds is coming to an end.
It's no secret how low rates are today, but there's nothing like a 32-year perspective to really illustrate the extremity. In the chart above, we see that the 30-year Treasury (in blue) and the 10-Year Treasury (in red) are down substantially from where they traded at what used to be perceived as quite low in the previous decade. In fact, the 10-year Treasury trades below the spike-low of 2.1% at the depths of the financial crisis.
While I have been expecting a nasty rout in bonds and have certainly positioned my Conservative Growth/Balanced Model Portfolio to minimize exposure, I have been careful not to sound the alarm too publicly, until now. With QE3 coming soon, perhaps today, we may see a "sell the news reaction" to the creation of yet more artificial demand for bonds. In any event, Treasury bonds are a poor investment, and that has implications for other fixed-income investments as well as other asset classes.
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