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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Bond bullishness
Commentary: Bond timers more exuberant than any time since March 2001 |
ANNANDALE, Va. (MarketWatch) -- You have to go back to March 2001, some 81/2 years ago, to find a time when the editor of the average bond timing newsletter was more bullish now than he or she is today.
These timers' current bullishness doesn't bode well for bonds, unfortunately, at least according to contrarian analysis.
Consider the Hulbert Bond Newsletter Sentiment Index, which reflects the average recommended bond market exposure among a subset of short-term bond timing newsletters tracked by the Hulbert Financial Digest. It currently stands at 56.7%, after having gone as high as 62.2% last week.
The last time it was higher was March 28, 2001, when the HBNSI stood at 62.7%. Far from rising thereafter, bonds plunged and interest rates rose. Over the subsequent two months, in fact, the CBOE's 10-Year Treasury Yield Index (TNX 34.47, +0.41, +1.20%) rose from 4.97% to 5.55% -- a big jump in so short a period of time for the normally-staid government bond market.
What happened after March 2001 was just one example, of course, and contrarian analysis hasn't always worked this well in the bond market. But it has been successful more often than not.
Consider the data in the accompanying table. Following the 5% of days this decade in which bond timers were most bullish, the 10-year T-note yield on average rose (and bonds fell) -- just the opposite of what the then predominantly bullish bond timers were expecting.
At the opposite end of the spectrum, interest rates on average fell (and bonds rose) following the 5% of days in which the HBNSI was lowest. Once again, that is just the opposite of what the then predominantly bearish bond timers expected.
In both cases, though, the subsequent trends of bonds and interest rates were precisely what contrarian analysts expected.
Notice also from the table that contrarian analysis this decade in the bond market has been most effective at the two-month horizon. By the time we are three months out, the difference in TNX changes between the highest and lowest HBNSI readings is barely half as big as it was at the two-month horizon.
This just goes to show how short-term contrarian analysis is. The highest confidence bet that contrarian analysis can make is where interest rates will be in mid November.
Furthermore, we should never forget that it's only a bet -- not a guarantee.
But right now the bet is that in two months' time, interest rates will be higher and bonds will be lower than where they stand today.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
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| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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