Saturday, July 29, 2006

Is this the end of the Bear Market in Bonds? 
Bill Gross, the best bondsman in the world, is calling the market bottom.

Why then should the Fed be stopping and the bond market have bottomed in early July? The overarching reason is that 425 basis points of short-term hikes and the concomitant tightening of the yield curve in the past several years has been more than enough to slow economic growth and contain inflation. That’s a bold statement to make in the face of an apparently still strong domestic economy, a booming global environment, and accelerating core CPI numbers, but PIMCO’s cyclical analysis would suggest that it is justified. No doubt, Asian and Euroland growth is acting as a strong magnet for U.S. exports but the tightening cycle in the U.S. seems to have run its course, primarily because of its effect on housing and related repercussions on consumer spending and economic activity.

I agree. I was just thinking last night, actually, that if I were going to be really crazy, I'd buy some long-term zero-coupons and ride the rocket for a while.

Splash, out


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