The US bond market is 2x bigger
(counting the value of all US bonds), and, there are less idiots
running around. Since most bonds trade over the counter—obviously
we have the Tbond futes—you better know what you are doing.
Basically, it's a pro's game, whether the pros are worth their salt,
it is another story.
I have to point out that 10-year Treasury
yields bottomed well in advance of the S&P 500 and they seem to
be topping out of late. On the latest levitation in stocks that begun
in July, we have a situation where Treasury bonds also rallied
pushing yields lower. As another ZH contributor observed , one of
those two is wrong.
When in doubt always go with the bond
market. Spreads between riskier bonds and Treasuries begun to notably
narrow since December. Even though they widened some by March, they
did not widen as much as they did last year. At one point earlier in
the year we had narrowing junk bond spreads (the junkier the better)
and a falling stock market. This is one of the reasons I did not
believe that last leg of the selloff in stocks, although those last
200 SPX points to the downside did come pretty fast. This is what
happens when you have to sell and there are no buyers.
Right now the situation seems
irrational in the other direction—not complaining, I know markets
are irrational by definition—and I believe we are setting up for a
nasty disappointment after the inventory rebound in the economy is
over. The bonds seem to be suggesting that...
I don't think you will be able to rationalize a sub-3% 10-year yield
as a green shoot.
EDIT: Another good post if you missed it.