Bond market: beware of bears

0


This article originally appeared on The Humble Dollar.

THE BOND MARKET has had an eventful year. Interest rates, which move in the opposite direction to bond prices, soared in early 2021 in hopes of an economic reopening. Cash yield, which started the year below 1%, jumped above 1.75% in March, before slumping in the second quarter and the first weeks of the third quarter.

Today, buyers of 10-year Treasuries can earn just over 1.5%, much less than the. Those with large bond holdings might fear such a negative real return. Unfortunately, if we want higher interest rates, there isn’t much we can do except increase the risk in our portfolio.

Things are not getting better abroad. Bank of America notes that high-quality global corporate fixed-income securities are set to lose 4% this year, taking into account both interest earned and falling bond prices. Meanwhile, global government bonds are on track for their worst year since 1949.

The funny thing about all these stats since the start of the year is that the starting point makes all the difference. Bond yields are generally positive over the past six months. Vanguard Long-Term Treasury Index Fund ETF Shares (NASDAQ 🙂 (VGLT) returned 6%. Even Vanguard Emerging Markets Government Bond Index Fund ETF Shares (NASDAQ 🙂 (VWOB) posted a gain of 0.9%. Shifting the period analyzed changes the story.

Now is the time of year when next year’s forecasts are pouring in from Wall Street economists and market analysts. Like clockwork, economists will likely forecast higher interest rates in 2022. These “expert” predictions could make you even more cautious about holding bonds. But consider this graphic: “The fall in bonds has been a constant for decades, and horribly bad for decades,” as researcher Jim Bianco said last Friday.

Disclaimer: Fusion media would like to remind you that the data contained in this site is not necessarily real time or accurate. All CFDs (stocks, indices, futures) and Forex prices are not provided by the exchanges but rather by market makers. The prices may therefore not be exact and differ from the actual market price, which means that the prices are indicative and not suitable for trading purposes. Therefore, Fusion Media assumes no responsibility for any business losses that you may incur as a result of the use of such data.

Fusion media or anyone involved with Fusion Media will accept no responsibility for any loss or damage resulting from reliance on any information, including data, quotes, graphics and buy / sell signals contained in this website. Please be fully informed about the risks and costs associated with trading in the financial markets, it is one of the riskiest forms of investing possible.



Share.

Comments are closed.