Tags: Deighan | Get | Out | Bonds | Before | Meltdown

Deighan: Get Out of Bonds Before Meltdown Hits

By    |   Thursday, 31 Dec 2009 08:17 AM

The surge in bond prices this year represents a bubble that will soon burst, says Dan Deighan, founder of Deighan Financial Advisors.

"My biggest fear is the bond market,” he told CNBC.

“There is going to be a meltdown. It's time to get out of bonds."

The Barclays Capital corporate bond index has gained 18.55 percent this year.

But the tepid demand for recent Treasury auctions shows investors are tiring of bonds, Deighan says.

"I think it's clear with what's been happening in December that it's time to (exit bonds). The yield curve is steepening."

The yield curve, which measures the yield premium of 10-year Treasury bonds over two-year Treasuries, recently widened to a record 2.88 percentage points.

"There's a bubble (in bonds), and I think that bubble's going to burst," Deighan said.

He says investors who wait to trim their bond portfolio will find selling those positions more difficult than selling stocks, as stocks are more liquid.

Not everyone is bearish on bonds. Mark Kiesel, a Pimco fund manager, predicts some corporate bonds will do well next year.

“They should outperform Treasuries in 2010, due to improving credit fundamentals and strongly supportive credit market technicals, in which demand should exceed supply.”

That in turn will push corporate yields down closer to Treasuries, he says

Kiesel particularly likes financial company bonds, thanks to improved asset quality, balance sheets and profits for those companies.

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The surge in bond prices this year represents a bubble that will soon burst, says Dan Deighan, founder of Deighan Financial Advisors. My biggest fear is the bond market, he told CNBC. There is going to be a meltdown. It's time to get out of bonds. The Barclays...
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Thursday, 31 Dec 2009 08:17 AM
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