The challenges of an intermediate-term bond bull

Money manager Paul Schatz wonders if there is something dark and dangerous lurking
JUN 16, 2014
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 … 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

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