Don’t bet against the U.S. bond market rally anytime soon. Conflicts in Ukraine and the Middle East, and record low bond yields in Europe, have unleashed a stampede into Treasurys, knocking benchmark 10-year yields to 2.30 percent, a 14-month low at one stage on Friday. They ended the week at 2.34 percent.
The U.S. bond rally, which accelerated on Friday after Ukraine claimed its artillery destroyed part of a Russian armored column that entered its territory, has shown earlier market calls from some leading bond investors, such as DoubleLine’s Jeffrey Gundlach, to be on the money.
“We are in a market environment now that is largely beyond fundamentals,” said Chris Orndorff, portfolio manager at Western Asset Management in Pasadena, California, a leading U.S. bond manager that has about $470 billion in assets. “The falling yield levels are a reaction to panic, as U.S. Treasurys continue to play the role that they have always played, the favorite asset in a flight-to-quality environment.”