Bond Commentary

Market participants’ constant preoccupation with spotting the next bubble in financial markets has spread to the bond market. Citing low yields, high bond prices, and strong mutual fund flows (according to Investment Company Institute (ICI) data), talk of a bond bubble has recently become more frequent in the financial media. The term bubble, which was used to describe tech and telecom stocks in the late 1990s, and of course, more famously used for the housing market in recent years, is associated with sky-high prices that selloff abruptly and violently and hand investors significant losses in the process. We strongly disagree with the notion that the bond market as a whole is a bubble waiting to burst. While Treasury prices are expensive, we believe current pricing is a reflection of underlying fundamentals rather than a speculative boom.
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