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February 17, 2022 | Government Bonds Priced for a Rebound

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Cash levels remain low as markets move into liquidation mode, and selling has been broad-based. While it’s typical for corporate bond prices to fall with equities, government bonds typically attract capital as it moves away from less principal-secure securities.

So far, despite equity losses, non-commercial traders have persisted with inflation bets and remain net-long large-cap stocks while net short government bonds. Treasury bonds have declined on the now hysterical expectation of seven policy rate hikes in 2022. The US 10-year Treasury yield at 2.04 is significantly above its long-term support at 1.51%, and the case for a government bond rebound has rarely been stronger. Lance Armstrong explains in the segment below.

With rising interest rates and inflation fears, there have been negative attitudes about owning Bonds. With a debt- and leveraged-economy, with low economic output, bonds have certainly been under pressure. A look at the TLT EFT as a proxy for bonder performance history, we can see that bonds have been oversold. With prices on the decline, and yields on the rise as the Fed fights inflation, this is a perfect time to buy as a risk-off hedge for portfolios. There will be more volatility in equities this year, and money flows are expected to go from risky stocks to safe-haven bonds, which history bears out. This is why we believe bonds will be among the better performing assets in portfolios. Here is a direct video link.

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February 17th, 2022

Posted In: Juggling Dynamite

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