It's already mid-July and I hope life is treating you well. Well, there's plenty of news to distract me from the daily grind and my investing goals. I would suspect that you might be in the same boat. The thing I have to remind myself is that no one else is going to be responsible for my money situation except me. I need to continuously focus to make sure I keep my eye on the prize and understand the forces moving around me. What's happening in the bond market is one of the major forces that is happening around me.
Bonds are NOT SEXY (although any bond traders might disagree) and we don't talk about them as much as we talk about stocks, but they are important.
I mean, when's the last time you had a conversation about them?
I'm changing that today.
3 Takeaways From What's Happened in the Bond Market
- Long-term bond rates are at historic lows. I mean, over the last 227 years of rate history, they are at their lowest point. When rates are low, bond prices are high, which means that investors are piling into bonds for safety --- flight response.
- The bond market is telling us that economic growth looks anemic. Long-term rates help tell us about the future economy. When rates are low, it means that growth expectations are low.
- Relatedly, interest rates are expected to remain low for the foreseeable future. Prior to Brexit, investors were expecting interest rates to rise. But, the current interest rates tell us that this is not the case. So, it will be cheaper to get car loans, home loans, and any other financing that is priced off of rates. Pay attention!
Digest this and leave a comment below with your thoughts on what’s happening with the bond market, and let me know if you questions. Next week, I’ll go over how you make money from bonds --- really, how do they actually work? If there are any other answers you want with respect to bonds leave a comment below. I would love to hear from you!