U.S. treasury bonds defied the experts last year.
The consensus was that once the Fed began dialing back its massive bond-buying stimulus program last January, bond prices would have to begin plunging. With the stock market so clearly in an ongoing bull market, why would anyone but the Fed buy bonds with their yields at record lows, providing almost no income? The lack of interest in bonds was obvious from their plunge in 2013 even when the Fed was aggressively engaged in its QE bond buying.
Instead, bonds rallied strongly last year, outperforming the stock market. The iShares 20-year bond ETF (TLT) gained 23.6% for the year, while the S&P 500 was up only 11.4%.
The bond rally continued into this year in spite of the on-again, off-again expectations that the Fed will begin raising interest rates this year. (Bond prices move opposite to interest rates).
It became clear as last year progressed that global buyers, who were seeking a safe haven from the turmoil in their weakening economies and markets, were more than making up for the Fed dialing back its bond purchases.
The consensus was that once the Fed began dialing back its massive bond-buying stimulus program last January, bond prices would have to begin plunging. With the stock market so clearly in an ongoing bull market, why would anyone but the Fed buy bonds with their yields at record lows, providing almost no income? The lack of interest in bonds was obvious from their plunge in 2013 even when the Fed was aggressively engaged in its QE bond buying.
Instead, bonds rallied strongly last year, outperforming the stock market. The iShares 20-year bond ETF (TLT) gained 23.6% for the year, while the S&P 500 was up only 11.4%.
The bond rally continued into this year in spite of the on-again, off-again expectations that the Fed will begin raising interest rates this year. (Bond prices move opposite to interest rates).
It became clear as last year progressed that global buyers, who were seeking a safe haven from the turmoil in their weakening economies and markets, were more than making up for the Fed dialing back its bond purchases.
However, in the spike-up created by their global popularity, U.S. Treasury bonds have become seriously overbought and overextended above their long-term 200-day moving average.
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