Soaring Bond Prices May Sound an Economic Warning

The prices of Treasury bonds are rallying fiercely. The slide in oil prices has elevated concerns about growth in the global economy, and investors, as they do in times of stress and uncertainty, are seeking out the safety of government bonds. 

The rally in global government debt is pushing their yields, which move in the opposite direction from their price, to astonishing lows. The yield on the 10-year Treasury note — a benchmark for mortgages and other interest rates — fell below 2 percent on Tuesday. Any investor holding that security would be paid only 1.94 percent each year, for the next 10 years. In the past, such a return would have been considered unthinkably slight.

 In other words, the bond market is raising the specter that a period of economic growth that may have already felt lackluster to many Americans could be on the verge of losing steam. 

Bond market analysts, however, offer some solace by saying Treasury bonds are not necessarily forecasting an actual recession. 

“We’re in the seventh inning of a business cycle and it may be coming to an end soon,” Mr. Goncalves, the analyst, said. “It is not calamity but a slowness that could linger for some time.”

4 Reasons To Buy Oil And Gas Now

Most investors can also agree that this makes an unprecedented opportunity to buy very fundamentally sound companies that are trading at a deep discount to their intrinsic value. However, many investors are holding off buying up these companies as they wait for prices to settle at the bottom, so that they can scoop up these companies up with the greatest possible upward potential. At the forefront of these investors' minds is where is the bottom and when will it come? 

This leads to the main thesis of this article: the time to buy is now. The main reasons for this are as follows:

1. Investor sentiment can change very quickly.

1. Companies are trading at discounts not seen in recent years.

1. Long-term fundamentals are in place.

1. A small drop in price in the short term likely wont benefit investors that much.

DYI Comments:  I completely agree this is an excellent time to dollar cost average into your favorite oil/gas/service company mutual fund or individual stocks.  DYI's favorite of course is Vanguard's Energy Fund . The two assets that have been beat up is gold and precious metals mining companies and oil/gas/service companies.  It is time to reduce your shares of your general stock market fund (such as Vanguard's S&P 500 Index Fund) and rebalance into uncorrelated assets as in the case of gold and oil.

DYI