Bond Traders Suffer Worst Rout in Three Years as Selloff Deepens
Bonds worldwide lost 2.9 percent this month through Oct. 27, according to the Bloomberg Barclays Global Aggregate Index, which tracks everything from sovereign obligations to mortgage-backed debt to corporate borrowings. The last time the bond world was dealt such a blow was May 2013, when then-Federal Reserve Chairman Ben S. Bernanke signaled the central bank might slow its unprecedented bond buying.
DYI Comments: In the end Mr. Market is all powerful far beyond the scope of governments. The U.S. and the world could experience a deflationary smash driving down rates possible negative. However in the grand scheme of things large capital gains in the bond are now gone.
Current Yield as of 10-28-16 is 1.86
Could rates fall below 1% for the 10 year Treasury bond? If the world experiences a deflationary smash that is entirely possible. However, when I state the large long term capital gains are behind us it is clear by simply putting an eye to the above chart. The bond rally of a lifetime for the G.I. - Silent - Boomer - and a portion of Generation X has been ONE HELL OF A RIDE! As an example my Father who grew up as a kid during the Great Depression - G.I. Generation World War II - would only purchase two specific types of investments. The first was certificates of deposits at the bank AND Utility Stocks. The gains from dividends reinvested and price increases were staggering. He passed away in 2003 leaving me an inheritance large in relation to a man who retired as a mailman who delivered the downtown route in Willoughby, Ohio for almost 30 years. Rip - all G.I. generations types had nick names - WAS ABLE TO RIDE THE INTEREST RATE DECLINE FOR 22 YEARS! WOW!
Of course that was THEN and this is NOW. The 10 year Treasury using that as a proxy is now SIGNIFICANTLY below the long term average going all the way back to 1871. That average is 4.59% as compared to the current yield of 1.86%! Markets regress either up or down creating it's mean. The bond market as with all markets is no different it is only a matter of when. Rates are now so low I'll leave the question of when and at what yield the absolute bottom to the speculators. As stated put an eye ball to the chart above and as a true long term investor what conclusions must you draw? The interest rate decline is now 35 years old. Would anyone in their right mind expect this to continue for another 35 years? A long shot at best - even for another 10 years is pushing the realms of reality. Well - ENOUGH IS ENOUGH - YOU GET THE POINT.
The Great Wait Continues - Better Values are Ahead
DYI