June 3, 2019

US Bonds showing signs of buying panic

Doug Kass draws attention to the US bonds via twitter

Besides the apparent overvaluation of bonds based on the implied low US Real GDP growth rate that is imputed (in the equation above) there are other examples of a short term panic in the fixed income markets:

* Get your contrarian hat on as after the 10 year US note's yield has fallen by 100 basis points (to 2.08%), JPMorgan research, in their infinite wisdom, is now calling for a year end 10 year yield of 1.75%!

* The yield on the long bond declined by nearly seven percent last week - that's the largest decline since July, 2016 - when, by my calculation, A Generational Bottom in Yields occurred (ending a 3 1/2 decade bull market in bonds).

* Since 2011 there has been three other examples of such swift and extreme declines , -- all three instances have led to a rapid short term increase in yields and lower bond prices.