Credit Crunch Investor

Maybe the Bond Market Is Right

I'm not so sure about the "...bottoms in yields don't come during economic downturns" argument. In Russell Napier's "Anatomy of the Bear" (an analysis of the bottom of four bear markets - 1921, 1932, 1949 and 1982) he concludes that "a recovery in government bond prices precedes a recovery of equities. In 1932, equity prices bottomed seven months after the government bond market. In 1921, 1949 and 1982, the lags were 14, nine and 11 months respectively". Thus, on the past history of major crashes, we should expect Treasuries to fall and yields to rise as the downturn continues.