Visualizing The Bond Bubble Inflows

Tyler Durden's picture

Kurt Brouwer highlights something that may substantiate the claims of those who claim there is a treasury bubble in the forming. Using the suddenly all too popular ICI data (which we have been presenting for well over a year), JPMorgan has tallied the total flows into stocks in advance of the tech bubble (April 1998 through March 2000) and compared it to the period since the Lehman collapse (July 2008 through June 2010), the result is surprising: there has been over $50 billion more allocated to bonds in the past 2 year period ($476 billion), than to stocks in advance of the biggest market bubble pop before the housing/credit bubble popped in 2007/8. Is this indicative of anything more than just everyone going on the same side of the trade? Not at all, however even that in itself should be sufficient for bond bulls to reconsider pushing every last cent of capital into what at least on the surface has all the makings of a an even bigger bubble than tech stocks in 2000.

full JPM presentation

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russki standart's picture

History´s biggest financial bubble, Bitchez! Just wait till it bursts....

Ragnarok's picture

This will be the second to last bubble to go, FRNs will be the last.  Then the supercycle begins anew.

Mr Lennon Hendrix's picture

"Gold is the ultimate buable!" -Soros

I take this to translate as ultimate=final.

Ragnarok's picture

ultimate bubble = final goal


He who has the gold (internation private bankers) makes the rules.

LeBalance's picture

He who has the might, takes the gold, and makes the rules.

Ragnarok's picture

But what if he who has the gold bought the might? Self flagellation?

Shameful's picture

I hope Soros is right!  It's not acting like a late phase bubble (the masses jumping into it), so that means if it is a bubble there is the speculative mania phase in front of us.  Such as the lines for coin shops in the early 80s.  A lot of money can be made in bubbles, get in early and get out after the dumb money moves in.  It's a game of who is the bigger idiot, you just don't want to be the last guy holding the bag.

rolo's picture

Exactly - bubbles are great if you ride the wave.  You might not catch all of it or get in at the beginning but you can take part. 

Gold/ Silver will have their day, IMHO, and it may not be that far away.  I am looking at a break of 21 on Silver for more confirmation.

But treasuries will also take a smacking of mammoth proportions, probably at the same time as Gold/ Silver skyrocket.  Hyperinflation a la 1970s, perhaps? 

ATG's picture

Monday afternoon after the 19 October 1987 stock market crash, the lines around the block into coin shops were ferociously buying.

Less than a quarter later they saw the error of their ways as gold did not see 497.10 again until 18 years later in late 2005

Spitzer's picture


The FRN is backed by the full faith and CREDIT of the US government. Treasuries go the same way as the dollar.

When people realize the US economy cannot service the govt debt then the debt gets sold off and hyperinflation kicks in. Book it.

Misean's picture

Hmmm...something about the word Bond and explosions...if memory serves they're quite spectacular.

pitz's picture

So what kind of collapse are we talking about here?  The Nasdaq crash was -80%, which, if the same happened to bonds, would place their yields back into the double digits.  Probably where they belong, given where the stock market is these days.



mrhonkytonk1948's picture

Guess I don't need to point out that investment grade bonds are probably a better "investment" than common stocks in a stagnant economy?  e.g. you can calculate the return ON and OF your money with at least a modicum of accuracy, as opposed to putting your wad on "red", "24", or "even" and hoping you win.  Just because a lot of people are doing it, does that make it a bubble?  Perhaps what we are seeing is a retail withdrawal (finally) from the rigged casino stock market (duh!).   For many people, the choice (hanged vs lethal injection) of paper alternatives is somewhat narrow, especially those trapped in the usual crappy OEF spread in 401k plans.   Not sure, but IF we are heading into a deflationary, no-flationary, disinflationary period, maybe this is a rational response.  Of course if the wheels really do come off and it's armageddon time, then the security markets become more or less irrelevant as the system evaporates.  I'm just sayin'....

Spitzer's picture

The "stagnant" economy is the same economy that the US government relies on to service the debt so I am sorry but you are a complete fucking idiot and so far, you have allot of company.

DoctoRx's picture

Comparisons of dollar numbers are almost irrelevant.  Obv the Fed has created over a trillion new dollars, most of which are intended to support Treasuries directly or indirectly.  So what's the surprise?

And Rosie keeps pointing out that households--the ultimate repository of bubble-icious inventory-- are vastly more exposed to stocks than to bonds of all types.  So there may be a good deal more on this bond bull/bubble; viz.:  Japan 1989-2010.  And counting .  .

Jason T's picture

anyone who can understand the consequences of what has occured is losing sleep at night for sure. I know there have been nights I have.  No way out of the disintigration that is coming.  Has we instituted glass  steagal, shut down the Fed and created a national bank again like we had before the Fed, I would be filled with hope and ambition.  With current system and path, I feel like a cripple.

Eternal Student's picture

I don't lose sleep over something I can't change. It's much better to focus (and conserve) your energy on things that you can. As in getting ready for what's coming down the line. If you're prepared, you can survive. And maybe even profit.

But in any case, get your sleep.You're going to need the reserves.

Misean's picture

The Bots are sure awful frisky today, paw!

packman's picture

Obviously we're talking strictly corporate bonds here, right?  If not - if this is also government bonds - shouldn't the 2008-2010 number be north of $3T?  Since August 2008 there has been an inflow of $2.6T in fed bonds.  (Well, if you include bills and notes)


DosZap's picture

Anyone IN Stocks,or Bonds(Corp/US), either way is insane.

The House is coming down.............I can't believe this shit.

Clayton Bigsby's picture

Wasn't it Bernard Baruch who said "You can have the top 20% and the bottom 20%.  I'll take the 60 in the middle." - Clayton B is down with that shit

Magua's picture

Gotta take the other side of this one. If it is deflation for the next 5 to 10 years, where do you go? Oh, I know the arguement of deflation then inflation, but deflation is hard to unwind. When the US consumer decides it makes sense to sit on his cash, and wait for better prices, it take a sea change to get him worried about higher prices. I just don't think we see inflation for a long (read 5 to 10 years) time.

So, if you are sitting there with enough cash, earning nada,  to finance 20 to 30 years of retirement, you are blessed. The rest of the country needs to find income. What if the baby boom generation gets to lip of retirement, only to see social security be reduced and moved out to 70 years. What if CDs are paying 50 bips, government bonds 2 to 2.5% for 20 year bonds, corporate bonds, which are still paying interest, paying 4 to 5%, and home prices another 20% lower.

No equity in the home to tap, no income and no safety net. That is the fear driving people into treasuries, and then rates could go a lot lower. Will it be a bubble at some point, yup, but it ain't yet, imo.

mrhonkytonk1948's picture

Funny you should mention that.  I started SS this year, even though I don't need it, on the theory that I would be in  the "untouchable" tranche when it's time to start whacking (more taxes, higher retirement age, sundry death by 1000 cuts).  We'll see,  I guess.

Spitzer's picture

You know nothing

The US economy cannot service the debt, when the debt becomes a non performing asset, it is priced like a non performing asset. The debt will get sold off and the dollar is backed by the debt so the dollar.

The dollar will devalue(INFLATION) just like the Euro did in June.

pitz's picture

Yup.  And if you plot the prices of 30-year US T-bonds, against that of house prices, you'll see that they are highly correlated over the past 100 years.  Until recently, of course, with bond prices completely diverging from housing prices.  The housing market is therefore telling you something about the direction of the long-term US bond market, and it's not pretty.


midtowng's picture

This is a great chart. Bubble or not, this bear market has pretty much played out.

fishbum2's picture

Almost everyone forgets that the Bond market is a capital market the size of which is an order magnitude larger than the stock market.