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When the bond bubble finally bursts, a lot of investors will get hurt
The extent of distortion in the bond markets is quite remarkable. Two weeks ago, I suggested that the bond market was caught up in a serious bubble and that its potential bursting represented the greatest threat to financial stability. Since then, bond markets here and abroad have indeed been weak. But you ain’t seen nothin’ yet. True, this isn’t a bubble in the classic sense of markets holding unrealistic expectations (as they did, for instance, during the dotcom boom). It arises as a result of the correct perception of official policy. But the extent of the distortion this has caused in the bond markets is ... (full story)