The bond market is NOT dead

People calling the death of the 36 years old bull market for US Treasuries (USA Government bonds) are exaggerating.

See the chart below, US Treasury bonds have been rallying since almost 40 years (since 1981), for those who are not familiar with fixed income products, when yields fall prices rise. And as you can see yields have been falling since a long time.

Graph from my Bloomberg terminal

As you may have heard, recently US Treasury yields have been spiking! Look at the chart below, since September 2017 yields have risen 70bps (0.7%), which is quite a strong move. Now, following this move, many in the market have started calling this the beginning of the end of the bond's bull market. A rather strong statement in my opinion.

Graph from my Bloomberg terminal

The recent selloff in 10 years Treasuries has indeed been noticeable for the magnitude of the move and the level of yields achieved. However, the 32bps yield change over the last 61 trading days has not yet shifted one standard deviation away from the average quarterly move.

That said, knowing that a bull market is when your returns are positive and a bear market when returns are negative, please have a look at the below chart, from my Bloomberg terminal.

Even during the massive yield increases in the late 1970s and early 1980s, total returns for US Treasuries were positive over a two years holding period. Although there were periods with significant return volatility. Part of the reason was that the high yields, prevalent during the period of late 70s early 80s, absorbed price moves by generating significant coupon (yearly cash flows: interest) income.

In the current low rate environment, income overcoming price change is difficult to achieve. So even during times when yields rose by significantly more than 1% over two years, there has yet to be a prolonged period of negative US Treasury returns.

Conclusion

The bond market is not dead, I do not believe bond yields will go up much further, it is just more difficult to make money from it now.
Hence my suggestion to keep diversifying. Into cryptos as well yes. It's a developing asset class, I strongly suggest to get into it, if you have not yet done so, at least tiptoe into it if you're scared of volatility, learn. I am really bullish cryptos given that institutional money is not yet invested in it, when it will, probably after regulatory advancements, then prices will skyrocket.

Bests,

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