Models trashed as bond rally defies expecatations


"I don’t expect the consensus to be right, I’m just surprised by how wrong it has been,” says Jim Bianco of bond market forecasts. The continuing rally in fixed-income has many questioning their models, including the FRBNY which last month altered its forecasting gauge to no longer include estimates from professional economists.

In what sounds suspiciously like curve-fitting, the PhDs' new model now shows the continuing rally in Treasury prices as making perfect sense.

Turning to the private sector, BofA's head of U.S. rates strategy Priya Misra sys a risk metric she's previously relied on - the gap between the rate on 10-year swaps and yields on Treasurys - hasn't worked since March. "Everyone is short and they are forced to cover," says Misra, throwing years of economics training out the window.

ETFs: AGG, BOND, BND, SCHZ, LAG, SAGG, GBF

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Comments (2)
  • Retired Colonel
    , contributor
    Comments (935) | Send Message
     
    They "...no longer include estimates from professional economists." That sounds like giving up the sport of playing marbles in the fast lane.
    2 Jun 2014, 11:20 AM Reply Like
  • XTigerX
    , contributor
    Comments (312) | Send Message
     
    The WidowMaker (short treasuries) lives and breaths these 5 years after the collapse. Some day it will grow old and die......someday. I'm not playing in that pool though and speculators shouldn't either.
    2 Jun 2014, 02:21 PM Reply Like
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