Analyst: Multi-Decade Bond Bull Market Is Far From Over

Jim Sarni of independent asset management firm Payden & Rygel recently penned a piece questioning the supposed end of the bond bull market, which has been one of the strongest in history.

Sarni writes that while a short-term correction in bonds will likely continue, investors still have several opportunities in fixed income. What’s more, institutional demand for bonds has not waned:

While we expect some correction in the fixed income markets, we see value in munis, high yield and EM bonds. Investors should add to positions when opportunities present themselves. In the government markets we are seeing strong appetite among institutional investor for long-term bonds – both treasuries and corporates. We think that government and corporate issuers may increase issuance of long duration bonds in response to investor demand.

Sarni expects rates to remain depressed for quite some time still, as the Fed is unlikely to act too aggressively (indeed they’ve only raised rates twice in the past seven years). Thus, the recent worries surrounding bonds are overdone:

Investor fears of higher interest rates have caused volatility, which we believe presents opportunities in the fixed income markets. Global central banks continue to intervene in the markets in such a way that natural market mechanisms cannot function properly.

The iShares Barclays Aggregate Bond Fund (NYSE:AGG) was unchanged in premarket trading Tuesday. Year-to-date, AGG has gained 0.33%, versus a 1.57% rise in the benchmark S&P 500 index during the same period.

AGG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 28 ETFs in the Intermediate-Term Bond ETFs category.

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