After the beating bonds have taken this week, some advisors have tried to reassure investors that the current declines are nothing more than the normal ‘first quarter’ weakness that fixed income has seen over the last few years. To test this, we looked at the annual pattern of the US Long Bond Future over the last five years. As the results below detail, while it is still early in the year, the current pattern is shaping up to be nothing like prior years.
Compare this year to 1994...actually from September of 1993 to March of 1994. Having lived through it, times now seem very similar.
What happens if the FED raises rates as they did in the beginning of Feb, 1994...there is even more leverage in the system now.
All that said, my crystal ball is broken, so maybe there is nor similarity at all.
John
Posted by: John Black | January 29, 2007 at 06:08 AM