BND - BND: Falling Employment Stability Temporarily Lifts Bond Market Outlook

2024-06-25 23:03:50 ET

Summary

• As services inflation has collapsed, I must revise my previous bearish stance on BND, as an inflationary rebound now appears unlikely.
• With job growth potentially overstated and full-time employment falling, the US appears likely headed into a period of much higher unemployment and lower consumer spending.
• Given debt, demographic, infrastructure, and geopolitical issues, I still expect higher long-term inflation, to the detriment of BND.
• Over the coming six to twelve months, I expect a rise in unemployment will temporarily result in disinflation and interest rate cuts, lifting the value of government bonds.
• Speculators may look into call options on long-term Treasuries. However, I continue to believe they're a poor long-term investment, as a recession may quickly result in a renewal of inflationary QE policies.

Low-risk long-term bonds are among my favorite asset groups to track, as I feel the bond market is often more telling of economic trends than stocks. Mostly, I've held a bearish outlook on the longer-term bond market, such as those in the popular ETF, BND . I first became bearish on BND in 2020 as I expected QE efforts to cause excess inflation and a rise in the long end of the yield curve....

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