Investors call the end of the government-bond bull market (again) ("…
Investors call the end of the government-bond bull market (again)
"1) The ten-year Treasury-bond is still below its level of early March 2017".
"A great turning-point has been declared in the government-bond market. The ten-year Treasury-bond yield has risen from 2.05% in early September to 2.37% which is still below its level of early March 2017".
"2) 85% of bonds are over evaluated".
"A survey by JPMorgan found that 70% of its clients had "short" positions in Treasury bonds betting that prices would fall and yields would rise while 85% of bonds are over evaluated following the Bank of America Merrill Lynch (BALM)".
"3) Optimistic global economy approach".
"Optimism is reflected about global economy and forecast for European growth have also been revised higher".
"4) A "Goldilocks" economy".
"Following the BALM more managers believe in "Goldilocks" economy than in a "secular stagnation" outlook".
"5) Stimulus expected in order to induce more economic growth".
"Investors expect some kind of stimulus like a tax cut which may increase the deficit and induce more economic growth".
"6) It is to the private sector to invest".
"Another factor is that the Federal Reserve is not reinvesting the proceeds when bonds mature. The private sector will have to absorb the bonds that the central bank is not longer purchasing".
"7) The peak may already have been reached".
"Globally there is no sign of a sustained surge in inflation. The momentum of growth may already have reached its peak".
"8) Slow-down of the central banks".
"Central banks know that higher bond yields can act as a brake on economic growth. If the economy shows any sign of wobbling, central banks will probably relent".
"9) Favourable environment for issuers".
"Low government-bond yields have pushed investors in search of higher income into taking more risk. Following BlackRock "there is a more favourable environment for issuers at the expense of lenders", as covenants protecting lenders has been deteriorating".
"10) Decreased liquidity".
"With the rate of bond defaults falling, and the global economy doing well, investors probably feel there is little to worry about, but there is a problem the corporate-bond market is less liquid than it was before".