The bond market is super strong. It's again hitting new bull-market highs as it surges higher into the new year.
We know that may seem strange, especially considering the big rise bonds have already had, but it's really not. Here's why:
1. There's a huge demand for U.S. bonds from all over the world. Even though U.S. interest rates are very low, U.S. bonds are still paying a higher interest rate than rates in most other countries. That makes them more attractive and the world's favorite safe haven.
2. The U.S. dollar is also super strong. That, too, enhances the appeal for U.S. government bonds, especially for foreign investors.
3. The same is true of the U.S. economy. It grew 5% in the third quarter, its biggest gain in a decade. That's in sharp contrast to the sluggish growth or recessions in other countries. And again, this makes bonds very attractive.
4. Deflation has the upper hand on the world stage, and inflation is low. It's probably going to stay low for quite a while, considering the plunge in the oil price. This environment is also ideal for rising bond prices.
5. Plus, U.S. interest rates will likely stay low throughout 2015.
With the rest of the world on thin ice, it would be too risky for the Fed to raise rates prematurely. This means bonds will probably keep rising for most of this year.
The bottom line? Keep your bonds.
Until we see otherwise, long-term U.S. government bonds are a good buy and hold. The major trend is solid, and it remains up. This market is strong and bullish, and government bonds continue to be the best overall investment in today's environment.
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.