But it is an implied promise that the sovereign will confiscate every single penny of every alternative asset it can get its hands on, in order to stave off default on its own bonds. The “safety” of sovereign bonds, is never absolute. Of course, if you think the economy is on the verge of overheating, be my guest, short treasuries. If you think an asset bubble burst is likely, then you should believe that treasury yields will sink. Treasury bears, please note that asset bubble burstings are inherently deflationary. Grave Consequences: Italy Bond Yields Soar, Protests Called, Euro Referendum.Rate Hike Expectations Dive On Housing Data.Economic Recovery in Italy: NY Times vs.Neither the economy nor the bond market work that way. Yes, we have late stage inflation, but so what? The stock market is likely headed for another bust. The economy is slowing and the Fed is hiking. Perhaps they have it right, but the fundamentals suggest otherwise. The same people have been calling for the the end of the bond bull market for a decade. This is not like nuclear war which cannot be reversed. Technical lines in the sand are one thing and fundamentals another. Note to Bill Gross, MarketWatch, the Edelson Institute, the Financial Times, Jeffrey Gundlach, Heritage Capital, and numerous other forecasters not caught up in that precise search: The is no such thing such as a line in the sand that when breached cannot be crossed back.
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