The bond market knows all and sees all. Regardless of inflation (reported or real). The bond market is telling us that they don't see rates rising anytime soon. So the question is... why settle for a 5% return when real inflation probably exceeds that and will do so for the foreseeable future? Is it because China is buying too many bonds? Is it because a risk-free negative -1% real return is better than investing in stocks right now? Maybe there is too much damn liqudity out there that it's the only market big enough to park all that money without worry? Maybe the bond market is not as efficent and I give it too much credit? My gut tells me it's a mixture between 1 and 3. Maybe a little of two, too. Thoughts?
The ten year just had a huge move. I think the bond market is telling us that rates are moving higher?
1 & 3, yes. 2 & 4, no. There's too much long-oriented hedge fund speculation that supports the longer-end of the yield curve.