Market Hubris And The Bond Bubble

The market has decided: Inflation is dead. Wages in the United States will remain stagnant for the foreseeable future. Sluggish growth will persist globally. These are the only conclusions that an objective third party can draw from the current state of the fixed income market—which has all of the tell-tale signs of a bubble: fundamentals don’t seem to matter, policies that derail the bullish treasury thesis are disregarded as mistakes, and market participants cannot remember what a bear market in treasury bonds looks like. In time, investors will look back at the current state of the U.S. treasury market and label it a bubble, but unfortunately, it will be too late.