Outside-IN

Outside-INblog

Outside voices and views for advisers

The challenges of an intermediate-term bond bull

Money manager Paul Schatz wonders if there is something dark and dangerous lurking

May 14, 2014 @ 6:20 am

By Paul Schatz

bonds, federal reserve, tapering, economy
+ Zoom

Having been a very lonely long-dated Treasury bond bull over the intermediate-term since late last year, I am often challenged as to who exactly is going to be buying all those bonds with the Fed reducing its purchases at each and every meeting and the economy steadily improving. My positive view on Treasuries since late 2013 had a time horizon of the coming months and quarters, but certainly not years as I believe the secular bull market in bonds ended in 2012.

While stubbornly low levels of inflation can partially explain the bond market's recent resurgence, there are other things at play. With the yield on the 30-year bond curiously falling substantially in 2014, I counter the bears' arguments with the following:

(See also: The bear market in bonds has not been seen and here's why)

• If the employment data are improving …

• If retail sales remain strong …

• If the Fed is tapering because the economy is doing better …

• If consumer sentiment is constructive …

• If shipments at the Port of Los Angeles see the largest increase in seven years …

If, if, if …

+ Zoom

Then why is the most economically sensitive bond's yield falling out of bed like something dark is lurking?

Paul Schatz is president of Heritage Capital

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Ed Slott: Tax strategies to help clients take advantage of market declines

When the markets decline or are volatile, it is an opportunity to put a few retirement savings strategies to work, according to Ed Slott, founder of Ed Slott's Elite IRA Advisor Group.

Latest news & opinion

Advisers get more breathing room to make Form ADV changes

RIAs can enter '0' in some new parts of the document before their annual filing next year.

Since banking scandal, Wells Fargo advisers with more than $19.2 billion leave firm

Despite a trying year, the firm has said it will sweeten signing bonuses for veteran advisers.

Is LPL's deal sweet enough for NPH's 3,200 reps and advisers?

They will have to decide if the signing package they are being offered by LPL makes sense. A lot is hanging in the balance.

Eduardo Repetto to leave Dimensional Fund Advisors

Gerald O'Reilly, currently co-CIO, will take over as co-CEO with David Butler.

Alternative strategies boomed after crisis, but haven't been tested

Because the S&P 500 has outperformed, convincing clients they need protection is a hard sell.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print