30 Year Bonds

Another thing I'm hearing is that bonds are toast. The biggest bubble of all time. Interest rates to the moon. Inflation is on its way. I don't buy it. Yes, the 30 year could move quite a bit lower from here. But I feel there is one last major bout of risk aversion for them to benefit from.

Risk is in the process of being repriced. Greater margin requirements first in silver, now in Irish bonds are reverberating across many other markets. Gold, platinum, palladium, and copper corrected sharply yesterday. Portuguese, Spanish, and Greek bonds are slumping on today's rumors that Ireland needs a bailout and that Portugal is right behind. Whether the real panic repricing sets in now or a bit later, it will come. I think 30 year bonds will benefit along with shorter-dated maturities.

Here's another thought: after the flight to safety bids up the price of US bonds, the rush for safety could be so powerful that then the bond markets do fall, but it would not be due to inflation, which would be the knee-jerk response, it would be due to fear. It would mark a sea change of psychology from return on capital to return of capital. Investors would be selling assets and raising cash to hoard, not to spend.