| 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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| 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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Bearish on bonds
Commentary: Dan Seiver continues to predict higher Treasury bond yields |
MarketWatch - Dec. 15, 2009 - by Mark Hulbert
By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) - Though the Federal Reserve isn't expected to make any changes to its interest-rate policy when it meets this week, long-term interest rates are nevertheless headed higher.
That, at least, is the forecast made by Dan Seiver, a visiting finance professor at San Diego State University and editor of an investment advisory service called the PAD System Report. If he's right that long rates are headed higher, of course, then Treasury bond prices are headed lower.
Seiver deserves to be listened to because his interest-rate predictions have been on target. Consider how far interest rates have risen since precisely one year ago, when I devoted a column to Seiver's forecast of higher rates. ( Read my Dec. 12, 2008,
The 30-year Treasury yield at that time stood at 3.06%, as judged by the CBOE's 30-year Treasury Yield index (TYX 45.14, -0.19, -0.42%) , and the 10-year Treasury Note index (TNX 35.65, -0.38, -1.05%) stood at 2.59%. The comparable rates today are 4.48% and 3.55%, respectively.
Those are outsized 12-month increases for the normally staid Treasury market, which in turn led to abnormally large profits for those who shorted long-maturity Treasurys, as Seiver recommended to his clients.
Seiver shows no signs of moderating his bearishness. On the contrary, he continues to recommend that his clients own the Ultrashort Lehman 20+ Year Treasury exchange traded fund (TBT 48.79, +0.18, +0.36%) --an exchange-traded fund that is designed to gain twice as much as any decline in the underlying bond index.
"The enormous fiscal deficits projected for the near and distant future, combined with an eventual return to less accommodative monetary policy, strengthens the case for higher rates," Seiver wrote earlier this month.
The Fed would have a hard enough time responding to these challenges at any time, Seiver adds. But the current political environment only makes the Fed's job even harder, which in turn makes it even more likely that Treasury bond yields will be much higher in coming years.
This adverse political environment can be traced to the "intense scrutiny" of the Fed's behavior and "animosity" towards the institution, according to Seiver. Some of this is the Fed's fault, given how poorly it managed the monetary system in the buildup of the credit bubble earlier this decade. And some of it is caused by populists who don't understand why an independent central bank "is so important to the long-run health of a modern economy."
Even if the bills in Congress to reduce the Fed's independence come to nothing, Seiver argues, the current political climate makes the Fed's "exit strategy from quantitative easing that much more difficult." And if any of those bills do pass, it would be an "unmitigated disaster."
With tongue firmly in cheek, Seiver adds: "Extending Congress's masterful approach to long-run fiscal policy to U.S. monetary policy could actually bring on the kind of inflation and high interest rates that the panic mongers are claiming (dubiously) are right around the corner."
How high is the yield on the long Treasury headed? Seiver predicts that it will get to at least 5% in 2010, compared to its current 4.48%, and to at least 6% within the next five years.
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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