With Bernanke’s decision to hike interest rates, off-loading bonds make sense

Indeed, while median home prices in the US were in July at 1.4% higher than a year ago, they had declined by almost 10% over the last three months, which is one of the steepest declines since 1990.

Since early July, the situation has, however, changed. There is now a widespread belief that the US housing market is dead and that the economy will slow down, and that, therefore, bonds will continue to rally because the Fed will shortly begin to cut interest rates. I may add that the media is also full of negative stories about the housing industry. Therefore, with presently so much bearish consensus about the economy, as a contrarian, I think that the upside for long-term bonds is now extremely limited.

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Source:- IIPM Editorial

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