Bond prices have cratered since the 30-year Treasury yield hit a record low of 2.22 percent Jan. 30 — it now stands at 2.57 percent.
So does that mean the bond rally is over?
"The short answer is no," writes Barron's columnist Michael Kahn
. "No matter how strong, every bull market has corrections. And so far, the decline in the Treasury market looks to be just that — a short-term dip in a long-term rising trend."
On the fundamental side, the market seems to be taking in stride the expectation of a Federal Reserve interest rate hike this year, Kahn says. Economists' consensus is that the Fed will move around mid-year.
Meanwhile, "inflation is virtually absent, and oil prices, while firming, are still at multiyear lows," he notes.
"All of these are reasons to believe bonds are not about to roll over and die."
On the technical side, while the Select Sector SPDR-Utilities ETF has slid more than 7 percent below its recent peak, "we can see several support features in place that may ultimately provide good buying opportunities," Kahn writes.
Utility stocks often act as a proxy for bonds.
"The bottom line is that the bond market, confirmed with interest rate sensitive areas of the stock market, is in a correction and not likely in a bear market," he notes.
"There are many reasons to expect that buyers will become active again at lower prices and dividend yields, especially in utilities, real estate investment trusts, and perhaps other sectors will be too attractive to ignore."
David Rosenberg, chief economist at Gluskin Sheff + Associates, isn't so bullish, saying global bonds and the U.S. dollar appear overvalued.
"Make no mistake: bonds are already priced for the world to come to an end, and the world is not coming to an end," he said, according to the Financial Post
"And looking at the massive net speculative dollar long positions on the InterContinental Exchange, the bull view on the greenback is arguably the most crowded trade there is across the planet."
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