Bond Yield

This annual exercise is a critical examination of our research effort for the year...presenting both the things we did well and also those things we didn’t do so well.

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Everyday consumers must find it difficult to believe twelve month inflation is just 2.5% (CPI-U), especially when filling up their gas tanks and their grocery carts.

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GDP growth of 5.0% projected for 2004. But, fast growing U.S. budget deficit ($458 billion in 2004?) is a significant problem for bonds.

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Economy picking up steam in second half. Early Q3 GDP estimate much better than expected.

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Investor preference toward bond funds, chasing performance, may be left behind once again. Bonds not expected to generate very good returns from current levels based on historical analysis of returns.

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Rising equity prices, strong economic news, and inflation trends  make further Fed tightening likely (next year).

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Bond market getting ahead of itself, fueled by flight to credit quality...But money flows could slow, should Asia outlook improve or Japan act decisively.

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Asian crisis not yet applying brakes to strong U.S. economy...Asia should be bigger “drag” on U.S. in next six months. Near term, bond market still correcting from being somewhat extended.

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Long treasuries are still well above the underlying interest rate (real rate of 4%-5%). The inflation outlook remains tame.

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Among the industrial nations, U.S. bond market offers highest yields, a reversal from earlier in the decade. Inflation outlook positive.

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Among the industrial nations, U.S. bond market offers highest yields, a reversal from earlier in the decade...A return to “normalcy” implies falling US bond yields.

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How long can the Goldilocks’ economy keep going? The current economic expansion (at 25 quarters) is long in the tooth by historical standards. Inflation outlook improved. Shortage of treasury bonds to become a reality?

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Economic expansion long in the tooth...Fed working to slow down the economy...Inflation cool...U.S. rates very competitive with foreign yields...strong dollar should continue to stimulate foreign bond buying.

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Economic expansion long in the tooth...Fed working to slow down the economy...Inflation cool...U.S. rates very competitive with foreign yields...strong dollar should continue to stimulate foreign bond buying.

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Bonds a good return alternative to stocks. Fed will help put the brakes on the economy while current yields seen to already discount another bump-up in rates.

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Bond rally should be rekindled by mid-year. U.S. yields remain relatively high compared to foreign yields. Bonds expected to outperform stocks over next 6-12 months.

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Bond rally has further to go in 1997 (6% or lower) if nervous equity investors seek safer havens, economy slows, and foreign appetite for U.S. Fixed Income remains. U.S. yields remain relatively high.

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Bonds outperformed stocks over past two months. Most investors not well positioned to take advantage of an extended period of bond’s performance superiority. As inflation threat recedes and economy slows, bonds should continue to outperform.

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Bonds (including zeros) expected to outperform stocks over next 6-12 months. Economy should slow by year end (recession in 1997?). Inflation should remain under control.

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Bonds rallied in early August on tepid employment and inflation reports, lower deficit news, and (surprise) welfare legislation. This bond market rally looks like it could get legs.

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