Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive...

[marmar]

Wolf Richter – Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.


The bond-fund massacre has been spectacular. Prime example: antsy investors yanked $7.7 billion in August out of the largest bond fund in the world, Pimco’s Total Return Fund. In July, they’d yanked out $7.5 billion, in June a record $14.5 billion. From May 1 through August 31, the fund’s assets shriveled 14%, from $292 billion to $251 billion; $26 billion from outflows and $15 billion from the shrinking value of the bonds. The fund lost 5.5% during that period.

By riding up the greatest bond bubble in the history of mankind, the fund has become known as a place where investors who don’t mind smaller returns but shudder at the thought of losing some of their principal could park their money without having to worry about it – but now, they’re worrying about it.

September is shaping up to be even worse. Bonds are cratering and yields are spiking worldwide. In the US, the 10-year Treasury yield kissed the magic 3.0% late Thursday, at least briefly, for the first time since July 2011, up from a low of 2.75% at the beginning of the month. It will drag other bond yields, mortgage rates, and other consumer and corporate rates behind it.

Pimco’s fund wasn’t alone: in total, $39.5 billion were yanked out of bond mutual funds in August, $21.1 billion in July, and a record of $69.1 billion in June. Emerging market funds, international bond funds… they’ve all gotten hit. ....................(more)

The complete piece is at: http://www.nakedcapitalism.com/2013/09/wolf-richter-bonds-bleed-largest-bubble-in-history-unwinds-but-the-great-rotation-into-stocks-is-deceptive-wall-street-hype.html#qVyMktMACecCwco3.99

[dixiegrrrrl]

1. translation: cost of debt is going up

and becoming harder to finance, to roll over.
Not good news for our debt ridden Gov't.

[golfguru]

2. Bonds were indeed in a bubble! However...

and they are still in a bubble considering $87 Billion printed every month.

However the real pin prick may take a lot longer since GDP growth is anemic. Employment growth is anorexic. Which makes me think the crash is not near.

[Benton D Struckcheon]

3. The bigger the crisis,

the longer it takes to get out of it. We're still muddling now. Actual prosperity probably won't happen until 2014 or so. Then we can start biting our nails about the next crash.