Chart of Lehman 20+ year Bond Fund: TLT

Chart of Lehman Aggregate Bond Fund: AGG

This is what I wrote in the last WIR.

Last week I wrote: This week, bonds held steady as I thought they would. Remember, a week ago I felt "there was a turnabout in the bond market." Well, this week, the bond market actually improved a bit, possibly from weaker economic data and possibly from worries in the Middle East that would have pushed foreign capital into U.S. bonds.

A close look at the charts indicates to me that the bond traders are not out of the woods quite yet. But for now the free fall in prices has stopped.

Technicians know that this is usually a case where the Fed is about to stop tightening because economic conditions are softening. (Longer-term) that's bad for equities and relatively better for bonds.

But in the next cycle, I do not believe that bonds are going to rocket ahead. I just cannot see interest rates and bond yields falling so dramatically.

I think what is happening to cause the TLT and AGG bond series to rally +0.87 pct and +0.53 pct W/W is that capital is coming out of equities and finding a home in the safe confines of the U.S. Treasury market.

The U.S. will not default on its bonds ever; but it may have to reflate like crazy. We may see $GOLD at much higher prices. Same too with real estate, but that's a problem. There is no tax on gold, but there are higher taxes to pay when you sell inflated real estate. Those higher taxes will be needed to cover the debt service on U.S. debt.

Americans will have to work harder to make ends meet (higher mortgage costs, higher property and realty-related taxes, higher energy costs, and so forth), but at least the U.S. won't go bankrupt.

The three big consumer-related mortgage finance companies all took major hits this week. Countrywide (CFC) dropped -2.80 pct (-2.95 pct on Friday), and Fannie (FNM) and Freddie (FRE) dropped -3.90 pct and -3.13 pct respectively W/W. That's a lot but as the housing market is coming apart at the seams, the mortgage companies are going to bear the brunt.

You might say this has just started.

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Weekly data charts:

Daily data charts:

Hourly data charts:

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US Bond Funds -- Monthly Data Charts

US Bond Funds -- Weekly Data Charts

US Bond Funds -- Daily Data Charts

US Bond Funds -- Hourly Data Charts

Consumer Finance -USA -- Weekly Data Charts

Consumer Finance -USA -- Daily Data Charts

Consumer Finance -USA -- Hourly Data Charts

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