Bond rally nearing an end?
- Thread starter gharghur2
- Start date
Markets have been pricing strong growth and higher inflation lately. So logically we are returning to a normal yield curve until one of these two things happen:
<p>a. The Fed changes its rethoric to prepare us for tighter monetary policy; or</p><p>b. Commodity prices go down and the inflation risk premium starts to melt again.</p>
Another round of successful auctions for long-term maturities in the US and overseas would temporarily flatten the yield curve.
That would make sense because US growth is what is keeping markets from dumping the dollar but if other economies perform well, there will additional incentives to look for alternatives to the dollar as a reserve currency.
"Todayâs *@?#»! bond traders are faced with a dilemma. Increased levered competition and a plethora of new moneyed non-economic buyers have changed yield, total return and alpha generating expectations in future years. How to cope and combat is the question to be posed and answered. PIMCO suggests in the near term that a total boycott of the bond market is impractical since non-economic central bank buyers should continue to dominate. We do suggest, however, a strategic boycott of most risk assets based on the reality that an investor is not being paid adequately to hold them, as well as the Greenspan assumption that todayâs low risk premiums ultimately lead to future periods that end badly. In turn, we currently suggest a substitution of near cash assets and non-dollar currencies for standard index assets. These out-of-index bets ultimately should produce higher returns with less than expected risk if done in moderate quantities. As with people, bad things can happen to historically good assets if driven to overvaluation. Blindly adhering to an index in order to insure a positive but diminishing relative alpha return is probably not an intelligent response to todayâs dilemma. Recognizing and ultimately avoiding the tyranny of an index can in effect produce a higher return with less risk. We hope with your guidance to be able to move in that direction in order to remain the future âAuthority on Bonds.â"
William H. Gross
Managing Director
Mr. Bill appears to be moving some of his holdings to "treasuries".
And, I've never been called a: *@?#»! bond trader, cause I'm a *@?#»! stock trader
William H. Gross
Managing Director
Mr. Bill appears to be moving some of his holdings to "treasuries".
And, I've never been called a: *@?#»! bond trader, cause I'm a *@?#»! stock trader