This chart “illustrates several truths about the bond market”, says Tracy Alloway on Bloomberg. Investors keep buying Argentinian debt even though they really should know better. The price of Argentina’s century bond has slumped by 45% as concern over the latest debt crisis has grown. At the same time, Austria’s 100-year bond has surged this year.
It’s not that Austria has covered itself with glory lately; indeed, its governing coalition recently collapsed. But as yields on other, shorter-duration bonds slumped amid the latest bond rally, Austria’s yield started to look relatively juicy. “Even if fundamentals matter, no investment stands out on its own. It’s all relative to something else.”
“Global fund managers [have trimmed] their allocation to equities yet again by 1% to 44.6% – the lowest representation since November 2016. The shift out of stocks was the fifth in a row (monthly)… as investors heed the deflationary message from the fixed-income market rather than look at the situation as a view that bonds are … overly expensive… It makes sense when you consider what the unprecedented level of global trade, political and economic uncertainty has done to global business spending plans. [Meanwhile] gold prices continue to rally even in the face of a strong US dollar, which is a durable sign of a secular bull market in bullion… Gold is firming… in all currency terms, which is overwhelmingly bullish. Not only are central banks rebalancing their reserves [towards] gold, but private market flows are coming back… Holdings of gold-backed ETFs soared to a six-year high last month.”
David Rosenberg, Gluskin Sheff