Bonds look bad, but...

**tsptalk** · 05-27-2009, 07:13 PM

Sentiment is on their side, but Bonds continue to get hit hard. Can bonds continue to fall with sentiment so low? What would turn this around? Probably a sell-off in stocks, but will that happen?

So, are bonds a good play because of the negative sentiment, or are they a play because stocks are due for a fall, or should we avoid bonds and stick with the rally in stocks?

**Bullitt** · 05-27-2009, 10:58 PM

Good chart but I can't help but to think how oversold can stay oversold. They've been pounded pretty hard this week.

I wonder how the line up to refinance a house in the mortgage market has been lately. A friend of mine in DC refinanced a month ago and the broker kept telling him how busy they've been with refi applications. I doubt everyone who's looking to refinance has done so already.

Unfortunately the conduit for us TSP'ers to trade bonds (F Fund) is 90% terrible and 50% bad, so I stay away from F all together.

**coolhand** · 05-27-2009, 11:01 PM

We need to remember how extreme the market can get. When something that's been wound tight starts to unwind, it can get silly. Crude oil was like that last year.

Glad I'm in G and not F.

**Birchtree** · 05-27-2009, 11:12 PM

Interest rates are up only temporarily - the Fed has much more buying to do to keep the mortgage rates low - as soon as they step up rates will drop and bonds will rally.

**coolhand** · 05-27-2009, 11:44 PM

Originally Posted by Birchtree

Interest rates are up only temporarily - the Fed has much more buying to do to keep the mortgage rates low - as soon as they step up rates will drop and bonds will rally.

Buying bonds has International consequences and some major players are having their say about it.

Nothing about this situation is a foregone conclusion.

**hessian** · 05-28-2009, 11:56 PM

Originally Posted by coolhand

Buying bonds has International consequences and some major players are having their say about it.
Nothing about this situation is a foregone conclusion.

Hey Cool,
I have to agree. IMHO, I think what happened Wed. was a portent of things to come. Wed., it seemed that the beaten down masses began to come to the realization of the consequences of the already massive debt burden the US and Taxpayers are facing - and was just the begginning of our "huddled masses" recognizing that the US, buying more bonds, is just going to make matters worse all around!

VR

**Bullitt** · 05-29-2009, 01:01 AM

Rates will go back down again one more time and here's why- On NBC nightly news tonight they announced that mortgage interest rates, "increased a half a percent in one day".

Like Tom's chart above says, when has mass sentiment ever been right?

I thought this was a good article in today's WSJ that brings up a point I have always wondered about. Who's going to buy up China's treasuries should they decide to dump them?

http://tinyurl.com/ob3fn8

**hessian** · 05-29-2009, 01:28 AM

Hey Bullitt,
You make some good points.
It seems to me, is the question we are talking about sentiment, for Bonds? - which is like a poll?
Or are we talking about a fundamental occurrence, related to our growing debt burden?

Most people find it difficult to even concieve of the amount of 1 Trillion dollars.
At over 4 Trillion currently, and growing without constraint, I believe the phenomenon is fundamental.
I do agree that China needs our Dollar strong and won't be selling our Bonds that they're holding (as they are heavily invested), however, while they likely won't be selling, they also may not continue to buy!! - as Coolhand suggested.

Very good rebuttals, and discussion!!

**tsptalk** · 05-29-2009, 02:31 PM

Originally Posted by hessian

Most people find it difficult to even concieve of the amount of 1 Trillion dollars.

I hear it takes 41,000 years to count to 1 trillion. That's counting 1 per second. It would probably take longer when you get to numbers like...

Two hundred fifty six billion, eight hundred thirty four million, five hundred sixty one thousand, three hundred and twenty eight.

Two hundred fifty six billion, eight hundred thirty four million, five hundred sixty one thousand, three hundred and twenty nine....

**JTH** · 05-29-2009, 02:33 PM

If I'm smart I'll stay out of bonds until we see the results of the June 10th auction.

**tsptalk** · 05-30-2009, 04:49 PM

I hated missing another rally in stocks, but you don't see many +1% days in the F-fund. The +0.78% return for the F-fund in May handily beats the G-fund (+0.25%), which is all I have been hoping for while on the sidelines.

But the big story remains... The rally continues in stocks.

**Bullitt** · 05-30-2009, 08:43 PM

Originally Posted by JTH

If I'm smart I'll stay out of bonds until we see the results of the June 10th auction.

JTH, I think it's been written for 5 months now that inflation is in the cards. The players have already positioned themselves for the big move.

http://tinyurl.com/mwxtzf