Today's Major Market Move: German 2 Year Bund Yield Declines 7 Basis Points in Past Week

Back in our March 20th post we discussed how sovereign bond rates in the major economies were starting to make a pronounced move higher. That post turned out to be anti-prophetic as since then yields have reversed themselves and some, like the 2 year German Bund, have hit new swing lows.

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During the two and a half week time frame from March 20, 2012 to April 7, 2012, 65 out of 72 sovereign bonds we track (from Japan, the U.S., the U.K., Australia, Germany and Brazil) have seen their yields decline. This means there remains one sizable community of investors, namely the sovereign bond market, that is still not convinced of the sustainability of this current recovery. When the prospects for growth in equities and commodities outweigh the need for safety in the bond market, we will start to see bond investors moving their money out of bonds and into the other asset classes. With interest rates still far below their historic averages, the current environment seems more like "Japan Syndrome" from the past 20+ years. Remember that the Japanese experienced several rallies (see 1996, 1999 and 2006) during their prolonged and ongoing malaise that ended up generating false hope.