The amazing sell off in the bond market over the past couple weeks since the election ended did not go unnoticed by market players. I've seen a ton of articles now proclaiming the 'bull market in bonds is over', and the 'bear is going to growl over bonds'. Yet, the long bond has not even reached the highest levels seen in 2015! All the sudden, the calls for the end of the bond bull are everywhere? It might be true, but color me skeptical (so far).
How many calls for this bond market bull to end? Year after year we hear it, yet it never materializes. Like the boy who cried wolf?
While the selling has been quite intense since Donald Trump was made President-elect, the assumption is bond investors are going to flee the market and rates will rise. Well, we should all know that would ONLY happen if inflation expectations start to rise. They have been rising somewhat but not to the the extent many have been calling for the 'end of the world' in the bond market.
With the U.S. 10-Year bond at 2.3% it is hardly a major cost to the government and corporations have not been rushing deals out the door to capture low rates, either. I understand trends, trajectory and momentum are important - certainly something that matters greatly to me as a technician.
If the bond market bull run is truly over, as it has been predicted 100 other times since the run started in 1981, then I'm quite sure there will be some major signal and trend. Some analysts have been wrong-footed for years, trying to predict the end has been an exercise in futility, but many look for the glory of being the ultra contrarian. Not my game, just take me where I can make money.
Yet, If that is indeed the case, there is some inflation on the horizon - and the Federal Reserve open market committee will do its job by snuffing it out with a more hawkish policy. Just like previous inflation cycles. We've seen bond selloffs before, and actually live to tell about it. This could actually put is in a more normal market, which is what everyone seems to want - how great would that be?