Bond Market Bull Run: 1982-2013

The Bond Market Bull Run died peacefully in his sleep at his home in PIMCO headquarters in Newport Beach, Calif., on Friday. He was 30 years old.

Bond Bull was born in July 1982 during a burst of inflation that sent interest rates above 15%. According to his father, former Federal Reserve Chairman Paul Volcker, Bond Bull lived the most prosperous life of any bond market in modern financial history, generating stock-like returns of 9.2% a year over his three decades on Earth.

Bond Bull had been in poor health for most of the last 10 years, stricken by the worst case of central-bank intervention doctors have ever seen, pushing his yield down to what was once seen as low levels. In 2008 he was diagnosed with stage IV public panic, which caused trillions of dollars to flow from equities into Bond Bull, pushing interest rates to the lowest levels in more than half a century. A blow-off top occurred last July, when interest rates on 10-year bonds fell to an all-time low of 1.4%, or about half the rate of inflation.

Until recently, doctors believed Bond Bull could survive another few years, kept alive by slow economic growth and investors still nervous about the stock market. But news of the S&P 500 hitting a five-year high and a rebounding housing market caused Bond Bull to take a turn for the worse in early January. On Thursday, Lipper reported that inflows into stock funds had reached the highest level in more than a decade. "I think this is it," Bond Bull whispered to loved ones. The next morning, the Commerce Department reported a surge in the construction of new homes, portending stronger economic growth. "My God," Bond Bull said. "It's over."

"There's nothing we could have done to save him," Bond Bull's doctor, Goldman Sachs managing director Hans Weber, said after his death. "Friends and family stood around his bed in disbelief, refusing to believe it was over. I mean, honestly, you guys -- he's dead. Bonds yield less than inflation. This is just arithmetic."

Weber addressed a packed news conference after Bond Bull's passing. "I know a lot of you are still holding out hope," he said. "Almost $30 billion flowed into bond funds in January alone. But I can't stress it enough: He is gone. The big returns, the low volatility -- all of that is over." Burt Michaels, a 64-year-old retiree from Tampa who holds all of his assets in 30-year bonds, told Weber he didn't know what he was talking about, noting that his portfolio had more than doubled in value over the last six years. "Exactly!" Weber snickered, muttering something about muppets.

In lieu of flowers, PIMCO requests an investment in any of its new equity funds. 

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Read/Post Comments (18) | Recommend This Article (39)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 06, 2013, at 10:18 AM, Raphael1990 wrote:

    I am really excited about what opportunities bonds will offer. In 5-10 years from now.

  • Report this Comment On February 06, 2013, at 10:38 AM, TMFKopp wrote:

    hilarious

  • Report this Comment On February 06, 2013, at 10:49 AM, ryanalexanderson wrote:

    I think the Bond Bull market should have signed a "Do Not Resuscitate" order, because the Federal Reserve is gonna keep it on life support for a very long time, pumping ever-increasing amount of bond purchases further and further out the yield curve. Vital signs or no.

    Great article, +1.

  • Report this Comment On February 06, 2013, at 10:55 AM, AvianFlu wrote:

    clever article.

    Next up: Night of the Living Bonds

  • Report this Comment On February 06, 2013, at 1:54 PM, astuber9 wrote:

    Wow, Morgan is also a creative writer. I wish he would not push equities so hard. I want to buy more cheap shares in my 401k before prices rise.

  • Report this Comment On February 06, 2013, at 7:03 PM, RaptorD2 wrote:

    His big brother Stocks isn't out of the woods either. The whole family's going to be going downhill soon. Just sayin'..... :)

  • Report this Comment On February 07, 2013, at 2:12 AM, lwbaum wrote:

    Is there a way to make money by betting bond yields will rise? If so, how? I would consider such an investment.

  • Report this Comment On February 07, 2013, at 8:04 AM, gene132 wrote:

    Well, the FED plans on keep interest rates at (effectively) zero. But the FED cannot dictate to India, China, Germany..at some point, demand for money will rise..and the USA must cease its insane spending ways. Think anybody will buy Federal paper when they can get 8% from China? I doubt it.

  • Report this Comment On February 07, 2013, at 11:40 AM, SkepikI wrote:

    You forgot the epilogue where Dr Bernanke attempting to keep Bond alive as a vegetable uses a Treasury drip that turns him into a Zombie. Zombie Bond staggers about for a year or two looking for the unwary to consume their savings. Zombie Bond can only feed on ancient savings kept as heirlooms by unwary traditionalists.

  • Report this Comment On February 10, 2013, at 12:37 PM, crca99 wrote:

    Thank you, tho muppets humor went over my head. I take it a retirement account advertising 6-8% one-year return on bonds is reporting old news not relevant to current year or new money..

  • Report this Comment On February 11, 2013, at 2:31 PM, TMFMorgan wrote:

    <<Thank you, tho muppets humor went over my head.>>

    It has been reported that Goldman Sachs employees call their customers "muppets" because they're easy to manipulate.

    More here: http://articles.businessinsider.com/2012-03-16/wall_street/3...

  • Report this Comment On February 12, 2013, at 11:07 AM, FoolishJayhawk wrote:

    One of the best articles.

  • Report this Comment On February 12, 2013, at 11:48 AM, toastedseeds wrote:

    As I know almost nothing about bonds I don't get the joke. I take it that the demise of the bond bull is premature? TMFMorgan, could you add a few links to a decent bond primer? I could google, but you never know if what you're reading is reliable.

    ts

  • Report this Comment On February 13, 2013, at 12:12 PM, TheDumbMoney wrote:

    PIMCO just completed a huge, gleaming new headquarters building: http://www.businessinsider.com/pimco-new-hq-bond-market-curs... It's almost too perfect.

  • Report this Comment On February 13, 2013, at 3:31 PM, eddietheinvestor wrote:

    People have been talking about the demise of bonds for years, more than a decade. They have been wrong year after year. Nothing new in this article. Please reprint it in 10 years to gt some perspective.

  • Report this Comment On March 08, 2013, at 8:08 AM, thidmark wrote:

    Some people will insist on propping up bonds a la "Weekend at Bernie's."

    Or is that "Weekend at Bernanke's?"

  • Report this Comment On March 08, 2013, at 8:09 AM, thidmark wrote:

    Some people will insist on propping up bonds a la "Weekend at Bernie's."

    Or is that "Weekend at Bernanke's?"

  • Report this Comment On March 09, 2013, at 10:42 AM, january24 wrote:

    Wow. I am so very happy that I invested in PIMCO's new Dynamic Credit Income Fund. (Symbol: PCI) It is a closed-end fund which just announced that it will pay a 7.5% dividend monthly, starting on April 1, 2013. (Of course, the 7.5% is not guaranteed, but it is highly anticipated by PIMCO. They're going around the world with this fund -- finding the very best investments on a global basis.)

    I think it might be a little too soon to be announcing the death of Bull Bond since I don't know very many other ways to earn 7.5% annually without much sweat. I could be wrong, and if I am, please tell me.

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