Bond rates have dropped, surprising the herd, which had expected a continued rise as the Fed tapers. Yves Lamoureux, the New Bond Guru, has put out a new report: Where are bonds headed for 2014. He expected, since February, the long bond to drop to 3.25% this summer before snapping back to higher rates.
In 2012 Yves called the end of the 30 year bond bull market. He was called the New Bond Guru for calling it correctly while the Old Bond Guru (Bill Gross) was still predicting bonds to rise and rates to drop. A year later in August 2013, after a rise and rates and then a drop, he put out an important bond call that bond apathy was ending and a bond panic would set in as rates were to rise again. After a 30-year drop in rates, the long bond rose from around 2.5% to over 4% in less than two years, an astounding change that Yves predicted too. The ten-year bond rose from 1.6% to over 3%. Now rates are falling and a short-term panic (rush to buy) may push them further down.
Yves commented to me that with all this money going around clueless, the next big trend he sees has nothing to do with Wall Street's current obsession about a slowdown and deflation. He sees a large reflation on the horizon that will surprise everyone again!