Is the Bull Market in Bonds Finally Coming to an End?

The bond market has been on a long bull run for about 30 years now, but the salad days may soon be winding to a close. Concerns about inflation and corporate debt coming do could hit ETFs right in the solar plexus and investors need to look out.

Bonds of all shape and size – munis, Treasuries, junk and corporate – have long been in favor with investors.

David Pett for Financial Post reports that for nearly 30 years, the bond market has been on an almost uninterrupted bull run, thanks to growing confidence that inflation was gone, and the the tech wreck and financial meltdown are behind us.

With record-low interest rates poised to move higher, inflation looming and the sovereign debt crisis in Europe threatening to spill over, the great bond rally may soon falter. We need to be prepared to make moves as warranted.

The junk bond market in particular could be set for a tumble. With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies, says Nelson D. Schwartz for The New York Times.

Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses. And as inflation continues to loom like a dark shadow, investors are pondering if it is time to exit the bond market.

Is it time? Let your exit strategy determine that for you. The strategy we use is exiting when a position has gone 8% off the recent high or below its 200-day moving average.