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Deutsche: Generation-long bond bull market is over

Sep. 12, 2016 8:31 AM ETAGG, GIM, JMM, BND, BWX, GOVI, PTY, BTZ, BHK, VBF, IGOV, PCM, RCS, FTT, ICB, JHI, TAI-OLD, SCHZ, BOND, GOVT, DBL, BNDX, FBND, INC-OLD, SPAB, RABy: Stephen Alpher, SA News Editor21 Comments
  • "Extrapolation of the last 35 years will be one of the most dangerous things that policy makers and investors can do going forward," write analysts Jim Reid, Nick Burns and Sukanto Chanda.
  • Included in the report is an amazing chart showing real returns by the decade in developed bond markets. Prior to the 1980s, decades of negative returns were well mixed in which those of positive returns across every economy. From 1980 to present, though, there's not one period of negative returns for even one developed-economy bond market. Not one.
  • The best case scenario as domestic financing markets start to struggle will be some form of capital controls. One might argue this is already occurring through new regulations all-but-forcing banks, insurers, and pension funds to buy domestic paper for reasons other than value.
  • Worst case is a "hard break" in which a major country defaults on its debt.
  • Neither scenario is likely to be favorable for the owners of long-dated fixed-income assets.
  • ETFs: AGG, BND, BOND, PTY, RCS, GIM, BNDX, DBL, BTZ, HTR, SCHZ, BWX, PCM, JHI, BHK, PLW, BNDS, IGOV, GOVT, JMM, TAI, INC, ICB, FTT, FBND, VBF

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