Why Bonds are Fairly Priced

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"You got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run"
Kenny Rogers- The Gambler

How do we know when to hold or fold 'em bonds?

If you ask bond traders, you will get many different answers. Some will say it depends on future inflation rates. Over the last 10 years, “It depends on the Fed,” has become a popular response. Economic growth rates, demographics, and the dollar are also likely replies.

According to my Twitter followers, over half think the Fed is the most significant determinant of bond yields.

In this article, I explore the essential factors that drive bond yields. I assess whether the recent increase in yields is a buying opportunity or foreshadows even higher rates.

This article is not just for bond investors. Given the importance of low yields to justify extreme equity valuations, rising yields will not only dampen earnings multiples but weigh on earnings.