Most T-Bond traders and investors always get it wrong?

Discussion in 'Financial Futures' started by crgarcia, May 7, 2008.

  1. Traditional by-the-book intermarket analysis says that bond prices go down (and yields go up), just before stock market plunges.

    Even last year, T-Bonds yields got beyond 5%, just before the stock market tanked.

    So, bond traders always get it wrong?
    Last year yields got beyond 5% (nobody wanted T-Bonds), when everyone should instead be stockpiling T-Bonds?
  2. 1) Higher trending interest rates are indicative of a healthy stock market and economy.
    2) Bond traders don't always get it wrong. It's usually foreign investors who are the "wrongest", especially Asians.
    3) Even with 5% yields, nobody wants to stockpile into them.
  3. yield goes up when demand for money (loans) is increasing. this happens in a growing economy.

    as the economy slows demand for moey decreases and rates go down.

    another factor in rates is expected inflation. this sometimes follows the same cycle.

    but, to your point, it certainly does seem that if you look at far out fed funds expectations and simply fade them when the market expects a large move you would have made money over the last several years even after taking a big hit from last years mid meeting cuts.

    it is really hard to forecast gdp growth a year out and then make a fed funds prediction accurately. my micro econ prof in college called the macro guys tea leaf readers.
  4. if the demand for treasurys is high (or increasing), ther price move higher and the yield is going down and how do you explain your argumentation?
  5. I was thinking the same thing..
  6. That is right. He means demand to borrow, not demand to hold bonds.