What could cause the bond bubble to pop? The short answer is higher interest rates.
I don't invest in bonds and neither do most posters on stock market forums. As a personal investment, bonds have always come over to me as boring and with interest rates at a thousand year low the near zero the potential reward isn't enough to cover default risk or interest rate risk.
None-the-less, the global bond market is said to be three times the size of global equity markets and so what happens in the bond market matters, It really matters.
And of course sitting on the top of / and to the side of the bond market is the CDO market ……. where bonds are ranked and grouped according to quality and bundled up into a kind of insurance policy and sold, sometimes with partial insurance on the insurance. That's another story.
The key story ATM is 1) increasing default risks for corporate and sovereign notes and 2) value of existing notes dropping inversely to climbing interest rates .
Am I right to be extremely nervous about the bond market ATM?
