The bond market is approaching an epic turning point
Source: Daily Crux
http://thecrux.com/the-bond-market-is-a ... ing-point/
If you’re holding a bond fund with more than 10% or 20% leverage, funds that hold long-maturity bonds, or packaged income products that magically pay a lot more than the bond market averages (all this information should be available online), get out now.
Owning individual bonds is much wiser and safer than owning bond funds right now. You avoid management fees, the cost of leverage and the negative effects they have on your return.
Money flowing out of the bond market has an attractive alternative in a stock market where traders and investors are optimistic that the regulatory environment and other factors will be pro-business. Remember, money goes where it's treated best.
If there were no perceived economic gain for leaving bonds, the money would just trickle out.
But the stock market looks positively irresistible by comparison, so it's the new home of $8.2 billion that were in bonds just about a week ago.
Inflation and rates would likely move up together and for the same reasons, but unless we see a huge, short-term shift up in rates I’m guessing we won’t see any 2008-sized losses in high quality bonds.
If rates do rise, high duration, low credit quality and long maturity bonds will get dinged the most.
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