Wednesday, June 15, 2016

Bond Bear Market Four Years Old?

In case you've forgotten, the 10 year note yield was lower in June 2012 than it is today.

It went from 1.5% to 3% in about a year (by summer 2013).

4 comments:

Taylor Conant said...

What are the odds that USTs are in a bear market while the bull in global bonds (JGBs, ECB debt) is hitting new lows?

Why isn't UST in negative territory for same safe haven reasons?

CP said...

Well, they are all separate credits.

Maybe the fundamentals of USTs are just so bad that they can't keep up with the Swiss and such.

Stagflationary Mark said...

At 1.43%, July 25th was the worst possible day in 2012 to buy a 10-year treasury.

Where are the losses for those who bought it?

Not only did they earn considerably more interest than those sitting in 3-month treasury bills, but they could sell their current treasury bond today for a slight profit (since 4 years have elapsed it's only a 6-year bond now). The 5-year yields just 1.07% right now.

With all due respect, not much of a bond bear market in 10-year treasuries if cherry picking the starting point can't even generate a loss.

Stagflationary Mark said...

As a side note, I will grant you that real purchasing power is in bear market territory.

I'm not heckling. I'm simply saying that lousy "safe" returns can get even worse.

Put another way, I have not expected nor do I currently expect the Fed to reward savers soon. The economy is far too fragile for that. :(