Federal Reserve talk and especially the testimony of Bernanke has sent chills up the spine of bond investors with the prospect of tapering the Qualitative Easing purchases of Treasuries and Mortgage Backed bonds.
If anyone says they know how this will turn out, don’t listen to them. All one needs to do is review the financial press from the last few days to hear a divergence of opinions. The questions of when the tapering might start, whether the economy is really that strong, is China slowing and what does that mean, have we come too far too fast in the housing market and finally, is it inflation or deflation with which we should be concerned linger.
Lot’s of interesting variables and crosscurrents.
I, for one would not be surprised to see the 10 year bond under a 2.00% yield in the not too distant future – not a prediction, just a feeling.