BND Vanguard Total Bond Market : Bullish and Bearish Analyst Opinions

The US lost 92k jobs, and unemployment rose to 4.4%. Roland notes the bond market is only pricing in one rate cut, which is "wild" given six negative bond reports. Rieder notes real rates are attractive and income is back. A negative payroll print of this magnitude typically forces the Fed to cut rates to support the labor market. While inflation (oil) is a concern, the economic deterioration (job losses) will eventually force a flight to safety in bonds, and current yields (>4%) offer a "cushion" of income while waiting for capital appreciation. LONG duration and aggregate bonds for income and capital appreciation potential on Fed pivot. Stagflation—if oil pushes inflation higher, the Fed may be unable to cut rates despite job losses, causing yields to rise (prices to fall).

1. THE FACT: "Some bond market participants" do not realize their holdings must lose on a real basis for the US to win the Great Power Competition, and will lose on a real basis if the US loses the Great Power Competition to China. 2. THE BRIDGE: The speaker argues that US bondholders are in a lose-lose situation. Either the US government will pursue policies (e.g., inflation to fund competition) that erode bond value, or a US loss in competition will also devalue US assets. This implies bonds are a poor investment regardless of the outcome. 3. THE VERDICT: US bondholders face guaranteed real losses due to geopolitical competition dynamics.

1. THE FACT: US November ISM Manufacturing is in contractionary territory, but 10-year UST yields are still >4%. The speaker states there will be no meaningful reshoring without explicit Yield Curve Control (YCC). 2. THE BRIDGE: High bond yields (above 4%) despite a contracting manufacturing sector make reshoring efforts difficult and costly. Without YCC to suppress yields, bonds are likely to continue to offer negative real returns if inflation persists or if the government needs to fund reshoring, implying they are not a good investment. 3. THE VERDICT: US Treasuries are unattractive given high yields relative to manufacturing contraction and the need for YCC for reshoring.

1. THE FACT: 10-year USTs yield 4%, while Black Friday average selling prices were up 7% y/y. 2. THE BRIDGE: Holding 10-year USTs at 4% yields when inflation (as indicated by retail price increases) is 7% y/y means bondholders are experiencing a significant real loss on their investment. This implies bonds are a poor investment. 3. THE VERDICT: US Treasuries are a poor investment due to negative real yields.