The Bond Market Is Repeating a Pattern Not Seen in Years. Here's What History Says Comes Next.
When bonds have done this in the past, stocks have usually suffered.
Overview
Much to the chagrin of the investors who were around at the time, the bond market is once again at 2007 yields, and if history is any guide, whatever comes next will be determined by whether the economy powers ahead or stumbles.
On Sept. 30, the 10-year Treasury yielded 5.26%, and on June 12, 2007, it closed at the same point. Owners of the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT), an exchange-traded fund (ETF) of long-dated government bonds, are getting particularly stung here, since bond prices fall mechanically when yields rise; its total return is down by 7.5% this year so far, and more pain may be ahead.
Details
The last time this dynamic occurred, the high and rising yields preceded a nasty crash in the stock market, though rising bond prices ultimately rescued many well-diversified investors afterward. The trouble is, this time the prospect of relief with bonds is nowhere to be seen, and neither is any crash in stocks.
Source
Originally published at www.fool.com.
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