Is David Tepper Right That the Bond Rally Is Ending?

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Sept. 4 (Bloomberg) -- Bloomberg’s Michael McKee examines the statement by David Tepper, founder of Appaloosa Management, that today’s rate cut by the European Central Bank is the beginning of the end of the U.S. bond market rally. He speaks on “Market Makers.”

Reflecting on what david tepper had to say to stephanie.

Michael mckee is here with some reaction.

Tepper has great timing and has used it to make extraordinary returns for investors in his appaloosa management hedge fund.

If he is right, it is a big deal.

If he is right, it is a big deal.

You notice he followed the old rule of prognostication.

You give a forecast and a time -- for a timeframe frame, but never both at the same time.

People like bill gross have been predicting the end of the bond market for years and then back off.

The bond market rally.

The bond or kiraly.

You have several problems here.

There was always going to be something out there, as long as there is the ukraine, and iraq.

People are going to be looking for a safe haven and that play continues.

It is not just the fed.

It is not just the ecb.

It is all of the central banks with their additional liquidity.

If they do not see growth pick up, they're going to go farther.

That is going to further depress bond prices around the world -- yields around the world and raise prices.

It may not be over yet.

It may be over for the treasury market.

It may not be over, but at some point we will see the beginning of the end of the rally, the unexpected rally that has lasted all year long.

You have yields so low that it is almost impossible for them to go significantly lower at this point.

People in the bond market are making money by various issues rather than getting into the bond market and letting prices rise.

People in the treasury markets have been burned.

Yields started to drop in january.

The markets are reacting.

And it is happening.

It is hard to draw an exact line between what the central banks are doing and what prices and up being.

The price discovery mechanism is gone.

It is hard to say that they can increase the money supply, that they can try to make that disconnect that he is talking about.

Mario draghi is not omnipotent.

He is not like janet yellen.

He does not have total control over policy because he has all these different countries.

If he gets anywhere near going over 2%, the germans are going to get out of that game as fast as possible.

It is not like we are going to see a big outbreak of inflation that is going to start raising money supply all over the world quickly.

Tepper made two predictions.

Equity prices continue rising, in addition to this beginning of the end of the bond market rally.

In the absence of fed tightening , but with the ecb continuing to loosen policy, that may indeed play out on the equity side.

Bill gross said that yesterday and one of his newsletters.

With growth so low, you cannot generate enough growth to pay off the debts of the world.

The central bank has to keep rates low.

That is good for equities.

At this point, he does not see anything changing in the near term because we are only going to be able to get up to about 2% growth.

Great stuff from stephanie talking exclusively to david tepper.

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This text has been automatically generated. It may not be 100% accurate.


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