My gut instinct for the last few years is that you want nothing to do with bonds. This has been correct. And just as the lead market for the bond bull market was Japan, it has been the lead market for the bond bear market. And Japanese 30 year yields continue to say bear market to me.
I see plenty of analysis of why now is a good time to buy bonds, and how interest rates are going to get cut etc. To be incredibly harsh - most of it reads like old men having a hard time accepting that the world has changed. As borderline old, I have some ideas I also struggle to let go , but the idea that inflation is going to act like it has for the past 30 years is an idea I can easily discard. For me personally, if JGBs are in a bear market, then that’s all I need to know that sovereign bonds everywhere are in trouble. We have already had the BOJ sell reserves to try and strengthen the Yen and now the Norinchukin being forced to sell foreign bonds due to capital losses. Governments are running the biggest deficits outside of war ever, and the biggest buyer is being forced to sell - what else do you need to know? But I know bond bulls, and slaves to backtesting models will find reasons to remain bullish. So lets talk about the French bond market - and why its another nail in the coffin of bond bulls.
