Need to Know: Bond market now meets these four bubble criteria
On a day the yield on the 10-year German bond TMBMKDE-10Y, -2.95% hit a record low and a fund manager survey found the most bullish view on bonds in close to 11 years, it’s worth asking if the mania for fixed income that is gripping markets is justified.
Reasons one, three and four are certainly met. The rationale for two is a little complex, but argues that major central banks, in creating bank reserves to engage in quantitative easing, have done so, as have professional investment advisers engaging in momentum strategies. The yield on the benchmark 10-year Treasury TMUBMUSD10Y, -0.10% rose to 1.66% after CPI data came in.
The buzz The Bank of America Merrill Lynch fund manager survey found the most bullish view on bonds since Nov. 2008. A People’s Bank of China official pledged not to devalue the yuan after being called a manipulator by the U.S. Treasury last week, while Hong Kong flights were again cancelled due to protests. Argentina will be in focus after stocks SPMERVAL, -37.93% and the Argentine peso ARSUSD, +0.
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