If You're Just Watching The Stock Market, You're Missing The Biggest Bull Market In The World

Stocks are down a bit today, but as you should know, they have been generally doing very well. The major indices are very close to their all time highs, even with all of the heavy selling of tech stocks in April.

But if you’re just watching the stock market, you’re missing the biggest show in town, and that’s the rally in the bond market, specifically the Treasury Market.

Here’s a look at 30-Year bond futures. As you can see, demand for bonds has pushed the price to levels not seen since early last Summer.

Why is this notable?

The US Treasury is the ultimate safe-haven. Forget everything you’ve ever heard about how much debt the US has, and how the US has a fiscal problem. That’s nonsense. The truth of the matter is that when the world gets at all nervous, the world buys Treasuries.

In 2013, as you can see, there was a lot of selling of Treasuries for a couple of reasons. One was that the world was coming out of crisis. It appeared that US growth was going to “break free” and achieve escape velocity growth. The other idea was that the Fed was in the process of “tapering” its bond purchases. The Fed buys an enormous amount of bonds, but that’s going away. This disappearance of the Fed was another reason to sell Treasuries.

But all that’s reversed with a vengeance this year, especially so in recent weeks.

Yesterday Dave Lutz of Stifel, Nicolaus blasted out a few theories why there’s so much interest in the subject.

One was the fact that the ECB is likely to ease policy soon, depressing interest rates in Europe, and creating more demand for US bonds in the process.

There’s also a lot of talk about “positioning.” Lots of folks were short bonds, and when everyone is short, then at some point everyone has to buy, so there may be a short-squeeze element.

In addition to all that, today we got weak economic data out of Europe, which furthers the idea that things aren’t solved in the world.

None of this is a totally satisfactory answer for why US Treasuries are on a tear. But it is the big story that everyone is watching.

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