We're getting to levels now where to buy bonds you have to subscribe to the notion that the economy's going to experience a slowdown and the Fed may have to reverse course later in the year. We don't subscribe to that.
We expect the combination of solid economic growth and higher inflation risks to push the Fed to raise rates higher than is implied by prevailing bond yields.
The last 14 Fed meetings have been anticlimactic. The Fed came, they saw, they tightened and told us to expect more of the same. Looking ahead, things are starting to get more interesting. The outlook for economy now is less certain.
Foreign investors will still get a lot of yield comparatively in the U.S., so we could see them buying.
Trading is light and at such times prices can get bullied.
We're approaching levels in rates at which you'll start to hear more and more chatter about asset allocation trades, away form equities and into bonds. At or above 5%, bonds look interesting.
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