My take on what we are seeing in bonds (just observation - no idea how they get out of this vicious debt market "circular firing squad").
10 yr bond yields are moving up ("investors" moving out of bonds) due to inflation expectations and consequently bond prices falling.
Traditional portfolio balance has been some iteration of 60/40 split stocks and bonds. If a fund manager works around that, they don't lose their job when volatility hits and fund returns are small or negative, as they are all in the same boat.
What we have now though is patently obvious potential negative returns/reduced spending power of the $$ value of those bonds they are holding. 10 yr's are still paying under 2% yield, with inflation at least 5/7 % plus ( think it is nearer 15% in reality).
Bond prices could well keep falling until debt servicing problems kick in, so these managers could arguably be recklessly loosing clients money if they hold bonds - hence they are downsizing/selling bonds, hence yields are moving up -the old short squeeze on bonds.
The interesting questions are how far can they let interest rates run, and where do they allocate those bond funds next?
Get that right and you could do well.
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