Tags: peter boockvar | bond market | bubble | colossal proportions

Peter Boockvar: Bond Market Is 'Epic Bubble of Colossal Proportions'

Image: Peter Boockvar: Bond Market Is 'Epic Bubble of Colossal Proportions'
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By    |   Thursday, 07 Jul 2016 01:29 PM

Peter Boockvar, chief market analyst for the Lindsey Group, has a dark and dismal warning for the fixed-income market.

"We're in an epic bubble of colossal proportions," Boockvar told CNBC.

Treasury bond yields in the U.S., the U.K. and Australia pushed to all-time lows Wednesday, while those in Germany and Japan dropped to unprecedented levels below zero. The average yield on the bonds in Bank of America Corp.’s World Sovereign Bond Index this week dropped below 1 percent for the first time, based on data going back to 2006, while almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index yield less than zero. Yields move inversely to prices.

Bonds are rallying on speculation the British vote to leave the European Union will damp global economic growth, driving demand for the safest assets. The Federal Reserve is losing confidence in its need to raise interest rates as officials face rising uncertainty about the outlook for growth at home and abroad, the minutes of its most recent meeting issued Wednesday indicate.

Boockvar believes that this activity is a ticking time bomb for the global economy. "It could be central banks that end this," said Boockvar in regard to upward momentum for bonds. "They'll call it being 'patient.' Their forecasts are now irrelevant, their communication is now meaningless and their tools to handle whatever might come our way are toothless," Boockvar said.

"Maybe Italian banks are telling us that central bankers and their negative interest rate policies are actually destroying the Japanese and European banking system?" he pondered.

Boockvar isn't alone in his warnings. "Bong King" Bill Gross has said sovereign bond yields at record lows aren’t worth the risk.

“The sovereign bonds are not up my alley,” Gross, who built the world’s biggest bond fund at Pacific Investment Management Co. and is now at Denver-based Janus Capital Group Inc., said on Bloomberg Television.

“It’s too risky.” Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price, he said.

Benchmark Treasury 10-year note yields were little changed at 1.38 percent as of early Thursday in New York, according to Bloomberg Bond Trader data. The record low set Wednesday was 1.318 percent. The price of the 1.625 percent security due in May 2026 was 102 1/4.

(Newsmax wire services contributed to this report).

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Peter Boockvar, chief market analyst for the Lindsey Group, has a dark and dismal warning for the fixed-income market.
peter boockvar, bond market, bubble, colossal proportions
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2016-29-07
Thursday, 07 Jul 2016 01:29 PM
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