This MarketWatch article really jumped out at me given the extreme hatred we continue to see with regards to the bond market. Out of 67 economists surveyed not one of them expects bond yields to fall:
"Jim Bianco, of Bianco Research, points out in a market comment Tuesday that a survey of 67 economists this month shows every single one of them expects the 10-year Treasury yield to rise in the next six months. The survey, which is done each month by Bloomberg, has been notably bearish for some time now, with nearly everyone expecting rising rates. In March, 97% expected rising rates. In February, 95% expected yields to climb. And in January, 97% held that expectation. Since the beginning of 2009, there have only been a handful of instances where less than 50% expected rates to rise."
That's a pretty incredible statistic. In late 2012 I noted how several mainstream economists were throwing in the towel on their misconceptions about "bond vigilantes". But that was obviously naive of me. It's clear that economists still think interest rates have but one direction to go - up. This argument appears part ideological and part ignorance. And the story, while largely the same, has taken on different versions over the years:
- 11 years ago Niall Ferguson and Laurence Kotlikoff were warning about rising interest rates based on the idea of "fiscal overstretch".
- As yields collapsed in 2010 Jeremy Siegel and Jeremy Schwartz warned of "the Great American Bond Bubble" (something I promptly dismissed).
- Then when the Greek crisis struck, economists like Alan Blinder were warning about the "bond vigilantes" (see here as well).
- Then in 2012 the story morphed into the "great rotation" and how investors were "rotating" out of bonds and into stocks (something that can't even happen in any real sense).
I don't know about you, but it seems like all of these commentaries are just different versions of the same ideological hatred of bonds, some fundamental misunderstanding of the monetary system or politics masquerading as economics. How long does this story have to be wrong before we start to seriously reconsider whether the underlying narratives are based on anything remotely resembling the reality of our monetary system and our financial system in general?