Long T-Bonds

The bond market is in the midst of both secular and cyclical bull moves. The cyclical bull market target zone is 9% yields for T-Bonds in the next 12-18 months. Maybe much lower on a secular basis. The recent correction carried to our 12% T-Bond buying zone and we loaded up again.

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The bond market is in the midst of both secular and cyclical bull moves. The cyclical bull market target zone is 9% yields for T-Bonds in the next 12-18 months, maybe much lower on a secular basis. The current correction has carried to our buying zone and we are continuing last month’s new buy program in long T-Bonds.

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Dedicated portfolios, TIGR types, long-term bond buy and holders and bond traders soaking up the government financing like so many sponges. For long-term T-Bonds at least, the demand may be greater than the supply for a while, creating a premium situation. It’s hard to believe a T-Bond could become an investment rarity, but these are strange times.

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Merrill Lynch was first but the rush is on, stripping existing T-Bonds of their coupons, repackaging and selling coupons and principal separately. While perhaps priced too high for sharp pencil pushers, to us they look like a very good investment. Corporate “zeros” should, however, be viewed very cautiously.

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