CHART OF THE DAY: How To Blow A Bond Bubble

button more charts
button chart prev
button chart next

Investor love for bonds just won’t quit. When it comes to U.S. government bonds, today the 10-year bond yield is plummeting, and is on the verge of breaking past its 52-week low of 2.55%.

If we then step back and look at all bonds in aggregate (inclusive of government bonds and corporate bonds), 2010 is indeed on track to be a banner year for bond-love.

As shown below, if we take the U.S. mutual fund flows into bonds for the six months ending June, and multiply it by two, then we arrive at an annualized 2010 fund flow which is set to be larger than even what we saw in 2009 (in blue). Meanwhile, stock fund flows continue to be negative (in red).

Bonds are either 1) Already over-hyped, or 2) Soon will be if this current trend continues:

(Data based on mutual fund tracking by The Investment Company Institute)

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.