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So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:11 pm
by Jim180
For several years all the so called "experts" were warning to keep durations short because intermediate and long term bonds were going to get crushed. Right now the 10-year Treasury has a lower yield than it did in during the "taper tantrum" of 2013, before the Fed even made a move with interest rates. I don't deny that there was some volatility along the way but right now most Vanguard bond funds have positive returns YTD, 1-year, and 5-year. It appears we are probably closer to the end of rate hikes so It seems the experts were wrong and anyone that went real short with duration missed out on gains they could have had leaving their bond portfolio alone.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:27 pm
by Tyler Aspect
My guess was that the US trade dispute with China caused the intermediate treasury yields to drop.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:31 pm
by livesoft
The predicted bear market in bonds came and went at least twice while you weren't paying attention.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:34 pm
by TomCat96
Being 0% bonds, I don't really have a dog in this fight.

But looking at the price history of BND starting from late 2016, it looks like the price drops followed the rate hikes, with subsequent rate hikes pushing BND lower or suppressing its rise.

BND hovered around 84 from july to october 2016 before a sharp drop to as low as 80.16 on december 16th 2016.
Although volatile, it continued its decline to 77.50 on November 2, 2018. All of this quite nicely lines up with the rate hikes from 2016 till now.
I havent been following policy, but if the hikes are over, it makes sense BND should rise after the hikes are done. (or anticipated by the markets to be done)

In other words, as far as I can tell, the data doesn't match your assertion. In fact, it seems to line up quite nicely with what should happen.

BND reacted the way it should have, with of course a few month time gap in the usual market anticipatory price corrections.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:40 pm
by MotoTrojan
Perhaps it’s less a bear and more the end of a bull; bonds returning to their trend of marginal real yield.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 4:54 pm
by Jim180
TomCat96 wrote:
Wed Mar 13, 2019 4:34 pm
Being 0% bonds, I don't really have a dog in this fight.

But looking at the price history of BND starting from late 2016, it looks like the price drops followed the rate hikes, with subsequent rate hikes pushing BND lower or suppressing its rise.

BND hovered around 84 from july to october 2016 before a sharp drop to as low as 80.16 on december 16th 2016.
Although volatile, it continued its decline to 77.50 on November 2, 2018. All of this quite nicely lines up with the rate hikes from 2016 till now.
I havent been following policy, but if the hikes are over, it makes sense BND should rise after the hikes are done. (or anticipated by the markets to be done)

In other words, as far as I can tell, the data doesn't match your assertion. In fact, it seems to line up quite nicely with what should happen.

BND reacted the way it should have, with of course a few month time gap in the usual market anticipatory price corrections.
But BND has had a postiive total return 4 out of the last 5 years, albeit small returns. EDV, with it's 24 year duration has even been positive 3 out of the last 5 years. The predictions were that anyone holding such funds would be suffering huge losses.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 5:06 pm
by BJJ_GUY
Everyone is aware that the bond market has not improved right? Yields are very low, duration of the AGG is at historical levels, and the quality of the credit making up the indices keeps getting worse.

Low absolute yields and extended duration... do some bond math and see what happens if rates rise 1 or 2%.

Also, to say maybe bonds will just go back to their long-term average yields.... how exactly does that happen? What has to happen to bond prices for yields to revert back to some level of normal?

I'm not predicting anything, but to assume bonds are any safer today than they have been during the predictions you asked about, well that could be dangerous. 2018 we finally saw a few periods where rates rose and stocks fell off. A lot of investors forgot that stocks/bonds are often positively correlated (which could be a heck of a surprise)

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 5:09 pm
by columbia
I see that 2 year treasuries are yielding more than the 5 year.

Those buying the latter think that rates will drop in the next two years?

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 5:13 pm
by jebmke
columbia wrote:
Wed Mar 13, 2019 5:09 pm
I see that 2 year treasuries are yielding more than the 5 year.

Those buying the latter think that rates will drop in the next two years?
2-years have been the sweet spot for a while. I bought a load in the early fall ~ 3% yield.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 6:39 pm
by TomCat96
Jim180 wrote:
Wed Mar 13, 2019 4:54 pm
TomCat96 wrote:
Wed Mar 13, 2019 4:34 pm
Being 0% bonds, I don't really have a dog in this fight.

But looking at the price history of BND starting from late 2016, it looks like the price drops followed the rate hikes, with subsequent rate hikes pushing BND lower or suppressing its rise.

BND hovered around 84 from july to october 2016 before a sharp drop to as low as 80.16 on december 16th 2016.
Although volatile, it continued its decline to 77.50 on November 2, 2018. All of this quite nicely lines up with the rate hikes from 2016 till now.
I havent been following policy, but if the hikes are over, it makes sense BND should rise after the hikes are done. (or anticipated by the markets to be done)

In other words, as far as I can tell, the data doesn't match your assertion. In fact, it seems to line up quite nicely with what should happen.

BND reacted the way it should have, with of course a few month time gap in the usual market anticipatory price corrections.
But BND has had a postiive total return 4 out of the last 5 years, albeit small returns. EDV, with it's 24 year duration has even been positive 3 out of the last 5 years. The predictions were that anyone holding such funds would be suffering huge losses.
Apples to oranges right?
The basis of a prediction like that would be the rising rates. I presume that's what you're pointing towards rather than a generalized assertion of what the experts say.

The rate hikes looked like they started on December 14th, 2016. The change in price occurred earlier in October. That sounds about right to me. Insiders, and analysts of the bond market wouldn't wait until the rate hike actually occurred to price it in.

From then on, the rates have increased by .25% quarterly, the last rate hike occurring December 19th 2018.
From then BND at least appears to have bounced back, according with your belief the rate hikes are done.

The bond market appears to have more or less followed the rate hikes.

Applying a generalized assertion like experts were saying bonds at large will be a bad investment for the next 5 years is something else altogether.
If that's what you want to focus on, that's really just an opinion. Experts are wrong all the time. I consider what the expert's actually conclude as irrelevant.

The basis of their prediction however, at least as far as I understood it, was that due to odd happenstance, rates had been declining for years, which served as a tailwind for bonds. Not only did you have the base return of the bond being reinvested, but you have the inverse correlation of lowered rates (which raised the nominal price of a bond investment) Then the global recession hit, and not only did bonds have their base return, they had the benefit of lowered rates AND increased demand due to a flight to safety effect.

But we all knew that couldn't persist forever. Certainly the contributing factors to the strength in bond markets couldnt go forever. Once the economy improved rates would have to rise...and so the prediction of the drop in the bond market.

And that appears to have occurred. Perhaps not as much as predicted. But the evidence is pretty apparent. Now as for the drop during that time affecting an overall 5 year growth period for bonds, that's equivalent to simply saying that experts were wrong about how long the rates were going to hike up for.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 6:41 pm
by Kenkat
Crushed and bear market in bonds means they went down a couple of percent or so in a particular year. That’s been my experience at least.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 7:05 pm
by BJJ_GUY
TomCat96 wrote:
Wed Mar 13, 2019 6:39 pm
Jim180 wrote:
Wed Mar 13, 2019 4:54 pm
TomCat96 wrote:
Wed Mar 13, 2019 4:34 pm
Being 0% bonds, I don't really have a dog in this fight.

But looking at the price history of BND starting from late 2016, it looks like the price drops followed the rate hikes, with subsequent rate hikes pushing BND lower or suppressing its rise.

BND hovered around 84 from july to october 2016 before a sharp drop to as low as 80.16 on december 16th 2016.
Although volatile, it continued its decline to 77.50 on November 2, 2018. All of this quite nicely lines up with the rate hikes from 2016 till now.
I havent been following policy, but if the hikes are over, it makes sense BND should rise after the hikes are done. (or anticipated by the markets to be done)

In other words, as far as I can tell, the data doesn't match your assertion. In fact, it seems to line up quite nicely with what should happen.

BND reacted the way it should have, with of course a few month time gap in the usual market anticipatory price corrections.
But BND has had a postiive total return 4 out of the last 5 years, albeit small returns. EDV, with it's 24 year duration has even been positive 3 out of the last 5 years. The predictions were that anyone holding such funds would be suffering huge losses.
Apples to oranges right?
The basis of a prediction like that would be the rising rates. I presume that's what you're pointing towards rather than a generalized assertion of what the experts say.

The rate hikes looked like they started on December 14th, 2016. The change in price occurred earlier in October. That sounds about right to me. Insiders, and analysts of the bond market wouldn't wait until the rate hike actually occurred to price it in.

From then on, the rates have increased by .25% quarterly, the last rate hike occurring December 19th 2018.
From then BND at least appears to have bounced back, according with your belief the rate hikes are done.

The bond market appears to have more or less followed the rate hikes.

Applying a generalized assertion like experts were saying bonds at large will be a bad investment for the next 5 years is something else altogether.
If that's what you want to focus on, that's really just an opinion. Experts are wrong all the time. I consider what the expert's actually conclude as irrelevant.

The basis of their prediction however, at least as far as I understood it, was that due to odd happenstance, rates had been declining for years, which served as a tailwind for bonds. Not only did you have the base return of the bond being reinvested, but you have the inverse correlation of lowered rates (which raised the nominal price of a bond investment) Then the global recession hit, and not only did bonds have their base return, they had the benefit of lowered rates AND increased demand due to a flight to safety effect.

But we all knew that couldn't persist forever. Certainly the contributing factors to the strength in bond markets couldnt go forever. Once the economy improved rates would have to rise...and so the prediction of the drop in the bond market.

And that appears to have occurred. Perhaps not as much as predicted. But the evidence is pretty apparent. Now as for the drop during that time affecting an overall 5 year growth period for bonds, that's equivalent to simply saying that experts were wrong about how long the rates were going to hike up for.
Bond markets aren't pricing risk (or the argument can be made) because the market has, and continues to be manipulated.

All the stuff you mention is good stuff, and true enough, but it's hard to say all that without also saying the Fed and other central banks have been loading up on US bonds. As the QE ended and QT began, it we saw bonds react to rates a bit more. Still, it's not a normal market as most other central banks in developed markets still have 0% rates, with a giant amount of sovereign bonds with negative yields. Therefore, UST and other US bonds remain a source for yield.

With current yields, I simply cannot fathom how anyone can think the risk is worth the nominal yield assumed. The forward nominal return from today until maturity is a known % and it's low.

For the person willing to accept what could happen to bonds in a sudden spike in rates in exchange for no more than 3%, well, that is something I'll need explained to me.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 7:08 pm
by HEDGEFUNDIE
If you backtest STT, ITT and LTT since the Fed started this rate raising cycle, you will see that they all ended up in about the same place, 1% CAGR. The difference was in the volatility.

This is why I use bonds primarily for their diversification / negative correlation benefit to stocks. Ignore the yield and just capture the rebalancing bonus.

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 7:16 pm
by BJJ_GUY
When I say yield, I mean YTM in general parlance. Doesn't sound like that would change your mind though.

We just look at expected risk/returns through a different lens, and that's fine.

I don't think the risk of loss (for what's offered in return), nor the unreliable negative correlation potential combine to make any sense for a portfolio (without immediate liquidity needs).

Also, because of the very low volatility and returns of the bonds I'd be willing to own (very low duration), there is almost no actual diversification benefit. It's really acting as a risk reducer (lowers total return variance) which - as you likely know - is different from the 'free lunch' that is diversification.

Also, I don't know those tickers you listed, so I hope my comment was still relevant

Re: So what happened to the predicted bear market in bonds?

Posted: Wed Mar 13, 2019 11:21 pm
by venkman
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 8:33 am
by dkturner
MotoTrojan wrote:
Wed Mar 13, 2019 4:40 pm
Perhaps it’s less a bear and more the end of a bull; bonds returning to their trend of marginal real yield.
Well stated.

From 1982 to 2012 10 year Treasury Notes had an annualized real total return of 6.0%. From 2013 to 2018 the real annualized total return has been a negative 6/10 of 1%. Clearly something changed 6 years ago, which has gone unnoticed by a lot Of people. FWIW for the 41 year period 1941-1981 the real return on 10 year Treasury Notes was a negative 2.25%, so things can remain unpleasant for the “bonds are for safety” crowd for a very long time.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 8:46 am
by Dottie57
I think the bull bond market is ending because long term very high rate bonds are coming to an end - paid off. My mom still has 2 or 3 bonds paying 8% or more. All are finished bu 2023. Unfortunately she is 100% bonds and her accounts are going down. My dad was afraid of stocks.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 8:49 am
by BJJ_GUY
dkturner wrote:
Thu Mar 14, 2019 8:33 am
MotoTrojan wrote:
Wed Mar 13, 2019 4:40 pm
Perhaps it’s less a bear and more the end of a bull; bonds returning to their trend of marginal real yield.
Well stated.

From 1982 to 2012 10 year Treasury Notes had an annualized real total return of 6.0%. From 2013 to 2018 the real annualized total return has been a negative 6/10 of 1%. Clearly something changed 6 years ago, which has gone unnoticed by a lot Of people. FWIW for the 41 year period 1941-1981 the real return on 10 year Treasury Notes was a negative 2.25%, so things can remain unpleasant for the “bonds are for safety” crowd for a very long time.
Yes, I agree entirely, something did change. The bonds got way riskier, and they have yields for which you no precisely the total return if held to maturity.

It's not about calling or timing a bear market. It's pointing out that you can get <3% nominal return from a ten year bond, but with a downside that is significantly riskier than when yields were such that returns were 6%+...

and what if yields and stock markets become positive correlated at precisely the wrong time, as has happened for prolonged periods throughout history? Again, I'm not predicting it, what I fear is an asset class many think of as steady returns without any (or very little) risk. I'm saying, risk embedded is as high as has been in a long long time, and it will be devastating to those counting on an inverse correlation between stocks and bonds as a certain hedge against market crashes.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 9:06 am
by TBillT
TBond bull and economist Gary Shilling is I believe shifting back to 30-year Treasuries, feeling the 30-year bull market is still going, and also thinking recession is in the offing.

I've been selling my corporate BBB bonds as the corporate bonds are expected to face serious downgrades if there is a recession. I wish I got some 30-yr Treasuries last week when they dipped a bit...I saw the dip but did not react.

Jeff Grundlach is thinking different, he is also worried about corporates, maybe long term TBond rates will stay steady under the circumstances of Fed unwinding balance sheet.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 9:21 am
by BJJ_GUY
Long term USTs make sense when used with a precise purpose. My guess is Gary understands the risks associated. LOL

Agree with you on the BBB space.

FYI... I'm not saying don't own bonds. Just saying, what's the up/down and will that reduce the odds of you achieving your goal?

For example, if I want that crisis/deflation hedge investors generally want from bonds, then I'm using USTs not the AGG, because I'm not looking for credit risk. The purity of UST means I can have a smaller % allocated, allowing to out more capital to work in higher returning assets. I'm not a fan of using the AGG rather than Treasuries for a hedge/risk reducer. Better expected returns over time being more equity oriented. Marginal return from the AGG isn't worth the added equity beta and credit risk to me.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 9:25 am
by BJJ_GUY
TBillT wrote:
Thu Mar 14, 2019 9:06 am

Jeff Grundlach is thinking different, he is also worried about corporates, maybe long term TBond rates will stay steady under the circumstances of Fed unwinding balance sheet.
Gundlach never really has corporate exposure anyway. Dude just produces with a portfolio full of mortgages year after year, and decade after decade.

I wonder why no one ever points that out when all his peers are compared to him (all with the same index). He manages a different strategy that most bond managers, but everyone overlooks it because Morningstar was lazy? That always confused me

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:19 am
by asif408
dkturner wrote:
Thu Mar 14, 2019 8:33 am
From 1982 to 2012 10 year Treasury Notes had an annualized real total return of 6.0%. From 2013 to 2018 the real annualized total return has been a negative 6/10 of 1%. Clearly something changed 6 years ago, which has gone unnoticed by a lot Of people.
Yes, the yield on the 10 year hit one of its lowest levels around that time since historical tracking began in the 1960s: https://fred.stlouisfed.org/graph/?g=mPYw, and rates have gone up since then. It shouldn't be shocking that forward returns of bonds are dictated by their starting yield. Low starting yield followed by rising rates = low future return.

In 1982 the starting yield was 13-14%, so it was kind of hard not to get a high return. High starting yield plus falling rates = high future return. The only reason no one got that 13-14% is because you had to reinvest at lower rates. At least for those folks reinvesting in bonds and bond funds now their future returns will be higher than in 2013.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:26 am
by Thesaints
The real experts simply said that a sharp increase in interest rate would cause a bond market drop (and a stock market one as well).
That sharp increase is not at all certain, though. Nobody expected a bear bond market no matter what and those who did simply don’t understand the basics.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:26 am
by HEDGEFUNDIE
BJJ_GUY wrote:
Thu Mar 14, 2019 8:49 am

and what if yields and stock markets become positive correlated at precisely the wrong time, as has happened for prolonged periods throughout history?
And so what if they do?

Image

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:33 am
by Thesaints
BJJ_GUY wrote:
Thu Mar 14, 2019 8:49 am
and what if yields and stock markets become positive correlated at precisely the wrong time, as has happened for prolonged periods throughout history? Again, I'm not predicting it, what I fear is an asset class many think of as steady returns without any (or very little) risk. I'm saying, risk embedded is as high as has been in a long long time, and it will be devastating to those counting on an inverse correlation between stocks and bonds as a certain hedge against market crashes.
Monetary policies are currently the main driver of bonds AND stocks prices. If that is not increased correlation...

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:45 am
by BJJ_GUY
Thesaints wrote:
Thu Mar 14, 2019 10:33 am
BJJ_GUY wrote:
Thu Mar 14, 2019 8:49 am
and what if yields and stock markets become positive correlated at precisely the wrong time, as has happened for prolonged periods throughout history? Again, I'm not predicting it, what I fear is an asset class many think of as steady returns without any (or very little) risk. I'm saying, risk embedded is as high as has been in a long long time, and it will be devastating to those counting on an inverse correlation between stocks and bonds as a certain hedge against market crashes.
Monetary policies are currently the main driver of bonds AND stocks prices. If that is not increased correlation...
You missed the part about 'at the wrong time' meaning both losing money.

Hedgie, not sure what all those graphs are about. My point is simply that both can lose money at the same time. You already know this. A lot of people think bonds are always going to be positive when stocks sell-off.

TheSaints, What basics are people missing? Do you have some kind of a crystal ball into the future of all bond markets? The basics are actually knowable, and arithmetic with bonds. Look at the AGG Index and assume tell me what happens to the expected return if the yield rises 100bps. What about 200bps?

I don't understand the contention here. Seems like you all know bonds can lose money, and that they can also lose money when stocks lose money. These are the only claims I've made, so really not sure what is being disagreed upon here.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:50 am
by HEDGEFUNDIE
BJJ_GUY wrote:
Thu Mar 14, 2019 10:45 am
Thesaints wrote:
Thu Mar 14, 2019 10:33 am
BJJ_GUY wrote:
Thu Mar 14, 2019 8:49 am
and what if yields and stock markets become positive correlated at precisely the wrong time, as has happened for prolonged periods throughout history? Again, I'm not predicting it, what I fear is an asset class many think of as steady returns without any (or very little) risk. I'm saying, risk embedded is as high as has been in a long long time, and it will be devastating to those counting on an inverse correlation between stocks and bonds as a certain hedge against market crashes.
Monetary policies are currently the main driver of bonds AND stocks prices. If that is not increased correlation...
You missed the part about 'at the wrong time' meaning both losing money.

Hedgie, not sure what all those graphs are about. My point is simply that both can lose money at the same time. You already know this. A lot of people think bonds are always going to be positive when stocks sell-off.
In those charts, only 5% of data points are in the bottom left quadrant.

And none of those 5% show double digit losses for both stocks and LTTs

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:57 am
by willthrill81
According to Portfolio Visualizer, the real annualized return of VBMFX since January of 2015 has been .01%. Bonds have certainly had far lower real returns over 4+ year periods.

I'm not aware of what we would consider a 'bear market' in bonds to actually be.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 1:41 pm
by goblue100
livesoft wrote:
Wed Mar 13, 2019 4:31 pm
The predicted bear market in bonds came and went at least twice while you weren't paying attention.
As usual livesoft and nisiprius are my voices of reason on the bear market in bonds.

viewtopic.php?t=239144#p3744054
Furthermore, they've been going up, over 1/2% in the last six months--along with my bank savings accounts. And people are still saying "Sooner or later interest rates will go up and when they do, oh boy, watch out, it's gonna be ugly, Katy bar the door."

Dalio said "A 1 percent rise in bond yields will produce the largest bear market in bonds that we have seen since 1980 to 1981." Well, OK, there has been a 1/2% percent rise in just the last few months, so whatever he's talking about, it's already half over.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 1:42 pm
by Clever_Username
Is a cub market a thing? Maybe it is a cub market.

I have been hearing since I first got serious about my retirement savings (a little over seven years ago) that a huge drop-off in bonds was about to happen. Still hasn't. Maybe it will.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 1:57 pm
by wootwoot
Jim180 wrote:
Wed Mar 13, 2019 4:11 pm
For several years all the so called "experts" were warning to keep durations short because intermediate and long term bonds were going to get crushed. Right now the 10-year Treasury has a lower yield than it did in during the "taper tantrum" of 2013, before the Fed even made a move with interest rates. I don't deny that there was some volatility along the way but right now most Vanguard bond funds have positive returns YTD, 1-year, and 5-year. It appears we are probably closer to the end of rate hikes so It seems the experts were wrong and anyone that went real short with duration missed out on gains they could have had leaving their bond portfolio alone.
It's still coming, just not on the timeline you want.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 2:11 pm
by carol-brennan
BJJ_GUY wrote:
Wed Mar 13, 2019 5:06 pm
Everyone is aware that the bond market has not improved right? Yields are very low, duration of the AGG is at historical levels, and the quality of the credit making up the indices keeps getting worse.

Low absolute yields and extended duration... do some bond math and see what happens if rates rise 1 or 2%.

Also, to say maybe bonds will just go back to their long-term average yields.... how exactly does that happen? What has to happen to bond prices for yields to revert back to some level of normal?

I'm not predicting anything, but to assume bonds are any safer today than they have been during the predictions you asked about, well that could be dangerous. 2018 we finally saw a few periods where rates rose and stocks fell off. A lot of investors forgot that stocks/bonds are often positively correlated (which could be a heck of a surprise)
Agree. What the bond market has shown us, among other things, is just how eager people are to get out of stocks if offered any kind of reasonable alternative.

What we're living through right now is not just not normal. It's nuts. We've got bonds in many parts of the industrialized world kissing 0% and lower. Meanwhile, any uptick above 2.7% on the 10 year seems to send the stock market into a tizzy.

Very thin ice we are treading on here. It's not scary only when you don't think about it too much.

The story ain't been fully written, so don't get too haughty about those predictions.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 2:30 pm
by DB2
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 5:22 pm
by Thesaints
HEDGEFUNDIE wrote:
Thu Mar 14, 2019 10:50 am
And none of those 5% show double digit losses for both stocks and LTTs
The two markets have rarely been so correlated, if ever.
BJJ_GUY wrote:
Thu Mar 14, 2019 10:45 am
TheSaints, What basics are people missing? Do you have some kind of a crystal ball into the future of all bond markets? The basics are actually knowable, and arithmetic with bonds. Look at the AGG Index and assume tell me what happens to the expected return if the yield rises 100bps. What about 200bps?

I don't understand the contention here. Seems like you all know bonds can lose money, and that they can also lose money when stocks lose money. These are the only claims I've made, so really not sure what is being disagreed upon here.
In fact, I'm in agreement. In case interest rates spike, bonds AND stocks will lose money. Yet, I'm not 100% sure interest rates will spike. It would take a political blunder, or some extreme event, I think.

Re: So what happened to the predicted bear market in bonds?

Posted: Thu Mar 14, 2019 10:30 pm
by venkman
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
I should've been more precise by saying "due to the predicted recession (which will likely lead to (another) bear market in stocks)."

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 10:27 am
by dkturner
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
Or a stock bull market that began on December 26.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 10:41 am
by willthrill81
dkturner wrote:
Fri Mar 15, 2019 10:27 am
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
Or a stock bull market that began on December 26.
A bull market is not generally perceived to have started when stocks start to make a turnaround.
Nonetheless, perhaps the most common definition of a bull market is a situation in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline.
https://www.investopedia.com/terms/b/bullmarket.asp

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 10:59 am
by MichCPA
willthrill81 wrote:
Thu Mar 14, 2019 10:57 am
According to Portfolio Visualizer, the real annualized return of VBMFX since January of 2015 has been .01%. Bonds have certainly had far lower real returns over 4+ year periods.

I'm not aware of what we would consider a 'bear market' in bonds to actually be.
+1 Its certainly not fair to expect a bond bear market to be -20% like stocks. It simply won't happen in normal duration bonds without some type of massive credit event. Considering a basically 0% return rate over your stated period and coupons just now sitting 1/2% greater than inflation, I think there is a case to be made that a 'bond bear market' has happened. They under performed cash last year even with the interest rate drop at the end of the year.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 11:14 am
by telecaster
I'd say predictions aren't worth the paper they are written on!

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 11:18 am
by DB2
dkturner wrote:
Fri Mar 15, 2019 10:27 am
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
Or a stock bull market that began on December 26.
It's still defined as a bear until IF we hit a 20% gain at which point it would be called a bull.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 11:39 am
by willthrill81
MichCPA wrote:
Fri Mar 15, 2019 10:59 am
willthrill81 wrote:
Thu Mar 14, 2019 10:57 am
According to Portfolio Visualizer, the real annualized return of VBMFX since January of 2015 has been .01%. Bonds have certainly had far lower real returns over 4+ year periods.

I'm not aware of what we would consider a 'bear market' in bonds to actually be.
+1 Its certainly not fair to expect a bond bear market to be -20% like stocks. It simply won't happen in normal duration bonds without some type of massive credit event. Considering a basically 0% return rate over your stated period and coupons just now sitting 1/2% greater than inflation, I think there is a case to be made that a 'bond bear market' has happened. They under performed cash last year even with the interest rate drop at the end of the year.
Perhaps bonds experiencing no inflation-adjusted gain over a certain period of time would be a better measure of a bond bear market.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 12:01 pm
by MichCPA
willthrill81 wrote:
Fri Mar 15, 2019 11:39 am
MichCPA wrote:
Fri Mar 15, 2019 10:59 am
willthrill81 wrote:
Thu Mar 14, 2019 10:57 am
According to Portfolio Visualizer, the real annualized return of VBMFX since January of 2015 has been .01%. Bonds have certainly had far lower real returns over 4+ year periods.

I'm not aware of what we would consider a 'bear market' in bonds to actually be.
+1 Its certainly not fair to expect a bond bear market to be -20% like stocks. It simply won't happen in normal duration bonds without some type of massive credit event. Considering a basically 0% return rate over your stated period and coupons just now sitting 1/2% greater than inflation, I think there is a case to be made that a 'bond bear market' has happened. They under performed cash last year even with the interest rate drop at the end of the year.
Perhaps bonds experiencing no inflation-adjusted gain over a certain period of time would be a better measure of a bond bear market.
Some measure of either having no gains or losing out to cash investments for an extended period seems to make sense.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 12:28 pm
by dkturner
DB2 wrote:
Fri Mar 15, 2019 11:18 am
dkturner wrote:
Fri Mar 15, 2019 10:27 am
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
Or a stock bull market that began on December 26.
It's still defined as a bear until IF we hit a 20% gain at which point it would be called a bull.
Yes, but the smart money buys equities when they are down, they don’t wait until they have made a 20% recovery. That’s why there is much less smart money.

Re: So what happened to the predicted bear market in bonds?

Posted: Fri Mar 15, 2019 12:35 pm
by DB2
dkturner wrote:
Fri Mar 15, 2019 12:28 pm
DB2 wrote:
Fri Mar 15, 2019 11:18 am
dkturner wrote:
Fri Mar 15, 2019 10:27 am
DB2 wrote:
Thu Mar 14, 2019 2:30 pm
venkman wrote:
Wed Mar 13, 2019 11:21 pm
The predicted bear market in bonds has been placed on hold temporarily, due to the predicted bear market in stocks.
The S&P dropped 20% off its 52-week high last December that has not been fully recouped...which means we are in a stock bear market.
Or a stock bull market that began on December 26.
It's still defined as a bear until IF we hit a 20% gain at which point it would be called a bull.
Yes, but the smart money buys equities when they are down, they don’t wait until they have made a 20% recovery. That’s why there is much less smart money.
I'm not arguing that either way; I'm just stating the known/used definition for a bull or bear.

Re: So what happened to the predicted bear market in bonds?

Posted: Sat Mar 16, 2019 11:23 am
by munemaker
Predicting interest rates is very difficult to impossible.

Re: So what happened to the predicted bear market in bonds?

Posted: Sat Mar 16, 2019 11:40 am
by Thesaints
munemaker wrote:
Sat Mar 16, 2019 11:23 am
Predicting interest rates is very difficult to impossible.
Very true. Although we recently went through a very special situation when one is sure that rates cannot go lower, only higher. Of course when they’ll do so is still not possible to know in advance.
Now the situation is that rates cannot go substantially lower, which is not as useful.

Re: So what happened to the predicted bear market in bonds?

Posted: Sat Mar 16, 2019 11:42 am
by munemaker
Thesaints wrote:
Sat Mar 16, 2019 11:40 am
munemaker wrote:
Sat Mar 16, 2019 11:23 am
Predicting interest rates is very difficult to impossible.
Very true. Although we recently went through a very special situation when one is sure that rates cannot go lower, only higher. Of course when they’ll do so is still not possible to know in advance.
Now the situation is that rates cannot go substantially lower, which is not as useful.
Agree - Interest rates certainly have a lot more room to go up than they do to go down.

Re: So what happened to the predicted bear market in bonds?

Posted: Sun Mar 17, 2019 12:32 pm
by packer16
I think it did not happen & will probably not happen. IMO the bond market, like the stock market is pretty efficient & is probably the best indicator of future expected returns. Bonds have an expected return at about their yield of 3%. Given the current inflation rate why would bonds yield more than 3%? You also have increasing demand for bonds as the Baby Boomers retire so I do not see the real rate of interest going beyond the current 1%. If inflation declines, you may actually have an interest rate decline. There are long periods of history with rates like this, from 1820 to 1900, as an example. What kept interest rates in check was the lack of a war, famine or epidemic & increasing productivity. So unless you think any of these will not continue why would rates go up?

IMO the central banks are more follower/modifiers than drivers of interest rate. They are also providing liquidity to avoid deflation. If the money supply did not grow then we would have deflation & all its resultant effects. Deflation is being caused by increased productivity which shows no signs of slowing down.

Packer