Investing Legend Says We’re in the “Biggest Bond Bubble in World History”

Hedge fund manager Paul Singer isn’t bullish on bonds. In fact, he thinks that fixed income vehicles like government bonds are in their biggest bubble market in history.

In his second quarter letter to investors, Singer, who manages some $28 billion at Elliott Management, called today “the most peculiar period we have faced in 39 years.”

That’s because persistent low or negative yields on sovereign debt have “broken” the global bond markets, artificially driving up the price of long-term bonds and pushing their yields down far below what investors should deem acceptable. “The ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense and large,” says Singer.

Those are bold words, but when one considers the fact that $11.4 trillion worth of sovereign debt carries negative yields, it’s easy to see why many believe the world has been turned upside down.

Bonds are a bit of a sore spot for Singer. You may remember his public battle with Argentina over unpaid bonds — the country defaulted on its $80 billion in debt way back in 2001. Some fifteen years later, Singer just recently negotiated a profitable resolution to the deal.

Thus far today, investors are ignoring Singer’s warning, with the bond market rallying once again.

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The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ:TLT) rose $0.69 (+0.50%) to $139.40 per share in premarket trading Monday. The TLT has gained 15% year-to-date, doubling the performance of the S&P 500 in the same period.

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