The Bear Market In Bonds Is Just Getting Started

The bond bears had a good run. The benchmark Bloomberg Barclays U.S. Treasury index declined as much 3.67 percent between early September and late September. Lately, though, they seem to have lost some of their resolve as yields on intermediate-term Treasuries fell back from their highest levels since 2010. If anything, they should be more bearish.

The Federal Reserve meeting last week, where the central bank raised interest rates for the fifth time in the last 15 months and signaled two more are on the way by the end of the year, should have breathed new life into the bears. Instead, bonds rallied, in part, as Chairman Jerome Powell downplayed the risks of faster inflation and stocks tumbled. But a close look at the Fed’s rate forecast reveals that the difference between its call for a total of three increases this year and four amounted to one estimate on the central bank’s “dot plot.”