The Bond Bubble

How come we never hear about a Bond Bubble? I’m always being told that we’re in a housing bubble. You certainly don’t have to look hard to find someone who’ll tell you that so-and-so stock is “due for a correction.” But everyone seems terrified to criticize the bond market.

When the Fed lowered rates, bonds did well. When the Fed raised rates, bonds did well. Alan Greenspan called it a “conundrum.” Don’t bond traders ever suffer from irrational exuberance? People just assume that the bond market is always right.

But now, bonds are falling. It’s only a minor leak so far. The yield on the 30-year T-bond (or at least, it was a 30-year bond when it was issued) reached 4.15% on June 3. The yield got down to 4.18% on June 27, but no lower. Since then, the bond market has backpedaled. Could this be a dreaded double top?

Posted by on July 19th, 2005 at 1:05 pm


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