Pay attention to the bond market’s new ‘creatures’
By Aline van Duyn Published: December 3 2010 19:14New creatures have entered the bond market ecosystem en masse. What is not yet known is whether these creatures will change the way the ecosystem works. Are they benign, or are they malignant?
The “creatures” I’m referring to are from planet Earth. Indeed, many of them are probably reading this newspaper. They are the individual investors who have been pouring their savings into bonds like never before......"
Norton's comment: How long will these new bond holders tolerate negative returns? Maybe 3 months Treasuries make sense but long term rates don't. That is why I have bet on the reverse US Treasury ETF (TBT). See chart above.It has been rising since Oct. announcement of QE2.
Also see 20 Year Treasury Yields below. Remember, the yields go up as they are sold at auction for a discount, since buys are less inclined to see value in a declining US Dollar as the FED floods make with newly printed dollars; that is, if the face value is $ 1000, they must sell at a discount of less than face value to find buyers. Thus, the yield goes up.
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