Tags: pimco | bonds | bubble

Pimco’s Crescenzi: Bonds Aren’t a Bubble

By    |   Friday, 27 Aug 2010 09:44 AM

The huge bond rally, which has pushed the 10-year Treasury yield to a 19-month low of 2.49 percent, has crossed into bubble territory, some experts say.

Pimco strategist Tony Crescenzi isn’t one of them.

“By standard valuation metrics, Treasury yields are not misaligned with historical norms,” he wrote in a column on CNBC.com.

“Specifically, yields are low because both inflation and the fed funds rate are low. Investors should view the low inflation rate and the near-zero fed funds rate as anchors to yields across the yield curve. The ship can’t go far with the anchor down and so firmly entrenched.”

Consumer prices rose only 1.2 percent in the year through July.

Investors’ disappointment with the meltdown of stocks in 2000-02 and again in 2008-09 as well as their disappointment with the housing collapse that’s still ongoing will keep them interested in bonds, Crescenzi says.

Baby boomers will fuel the bond rally too, he says. “A demographically aging population is likely to have a lasting appetite for bonds, which are higher in the capital structure than other asset classes.”

Crescenzi isn’t alone in his bond bullishness.

“The market is being driven by fear,” Charles Comiskey, head of Treasury trading at Bank of Nova Scotia, told Bloomberg.

“The market is saying that they think there’s a high probability of a double-dip recession. They will hide in Treasuries until there’s more clarity on the economy.”

© 2017 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
The huge bond rally, which has pushed the 10-year Treasury yield to a 19-month low of 2.49 percent, has crossed into bubble territory, some experts say. Pimco strategist Tony Crescenzi isn t one of them. By standard valuation metrics, Treasury yields are not misaligned...
pimco,bonds,bubble
233
2010-44-27
Friday, 27 Aug 2010 09:44 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved