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Optimist’s Burden Of Proof – Are Bonds “Distracted” Or “Depressed”?

Saturday, April 8, 2017 19:09
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(Before It's News) / by Tyler Durden / Apr 8, 2017 12:35 PM

Authored by Jeffrey Snider via Alhambra Investment Partners,

The idea that interest rates have nowhere to go but up is very much like saying the bond market has it all wrong. That is one reason why the rhetoric has been ratcheted that much higher of late, particularly since the Fed “raised rates” for a third time in March. Such “hawkishness” by convention should not go so unnoticed, and yet yields and curves are once more paying little attention to Janet Yellen. When Mohamed El-Erian wrote in what was I guess an oped in the Financial Times on Monday that bond investors were “distracted”, it was his subtle way of attacking them as wrong.

In that way, we are truly back to late 2013 and early 2014 all over again. But back then the Fed’s positivity side, thus bad for bonds, had a whole lot more going for it (even if it was in total still a thin catalog). Recovery at that point was at least plausible under the undetermined guidance of QE3 (and 4), whereas today not even Fed officials talk that way or even bring themselves to mention QE.

This isn’t to say that the bond market or eurodollar futures have everything right, far from it. As I argued earlier this week, these very markets were way off at several points and for several years. Treasuries as well as eurodollar futures were firmly within the camp of higher interest rates and monetary policy support until 2011. In other words, bond investors then were wrong, and even though it took several years to fully appreciate the implications of the con job that was QE, the bond market and eurodollar futures curve have been far more right than wrong since then (the noted exception being late 2013).


The post Optimist’s Burden Of Proof – Are Bonds “Distracted” Or “Depressed”? appeared first on Silver For The People.


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