Osi, I have recently started to take a look at the bond markets....

Osi,

I have recently started to take a look at the bond markets. What is going on there seems to be driving the bubbles in other asset classes, or at least helps to explain their existence. Not that there isn't any reciprocity, but when the government and central banks and heavily involved, it is very hard to ignore.

Whether it is was due to the crisis ten years ago, more and more pension funds looking a 'safe' places to park cash, the 'threat' of deflation, or a phenomenon that has fed on itself over many decades, the demand for bonds, especially now for those with higher yields, such as corporate bonds, has hit a tipping point.

I do not know if it is artificial demand created by government and central bank policy or real investor demand, but there is no denying that bond prices are very high / interest rates are very low. However, at the same time not all bonds can be 'good' in the same way that every stock or every property is 'good'.

What is interesting, though, is that new financial products, such as ETFs can be used to package up and create liquidity for illiquid bonds. That is great for the people looking to offload them, but it does not change the fact the underlying business is barely investment grade. To tell you the truth, I am still trying to get my head around the situation.

However, I do know that I am really late to the party, so to speak, so in relative terms, bonds must extremely expensive by now. It has taken 3 to 4 decades to get to this point, and it can't get much better or worse/depending on whether you are a borrower or lender. It seems easier to profit from falling interest rates than rising interest rates, which is why people might be so addicted to former.