The bond market has collapsed. Why a strategist says accept the pain and get back in.

Investors are more or less trained to think of assets in stock terms. That is, a correction is a 10% drop from its peak, and a bear market is a 20% drop, etc.

But not all assets are created equal. In a market as volatile as, say, bitcoin BTCUSD,
a 20% drop is not a big deal. In contrast, for an asset as stable as bonds, a smaller drop has a bigger impact.

And the 11% drop in the Bloomberg US Bond Aggregate Index from its peak is the biggest drop since the bond bull market began more than 40 years ago. “Guys, this was a bond crash,” says Kevin Muir of the Macro Tourist blog. “There is no other way to describe it.”

So the natural discussion after an accident is if or when luck will reverse. Lance Roberts, the chief investment strategist at RIA Advisors, argues that the time is now.

Roberts argues that the US economy is more leveraged than ever, with the average consumer needing $6,400 a year in debt to maintain current standards of living. “That’s why, with the great need for cheap debt to support living standards, sharp rate increases have an almost immediate impact on economic activity,” he says.

Technically speaking, he adds, the 10-year Treasury yield BX:TMUBMUSD10Y
it is now 4 standard deviations above its 52-week moving average and near the top of the long-term downtrend channel since 1980.

Roberts says that while yields may rise temporarily, there is a point where something breaks, causing deflationary pressures to reassert themselves. Roberts points out that previous bond bear markets have met new highs, in as little as two months.

“While buying bonds today may still cause some ‘pain,’ we are likely closer to one major buying opportunity than another,” he says. “More importantly, if we’re correct, the next bond bull market will likely outperform stocks and inflation-related trades over the next 12 months.”

The buzz

MSFT from Microsoft
it beat profit expectations after raising the prices of its suite of Office products.

Google Proprietary GOOGL Alphabet
reported a rise in earnings that fell short of analyst estimates as it announced a new $70 billion share buyback plan.

Wednesday’s earnings list includes Boeing BA,
T-Mobile USA TMUS,
and after closing, the owner of Facebook Meta Platforms FB
and Ford Motor Co.F.

Mattel Mat
Shares rose in premarket action after The Wall Street Journal reported that the toymaker has been in informal talks with private equity firms Apollo Global Management and L Catterton about the purchase.

European natural gas contracts surged after Russia cut off supplies to Poland and Bulgaria.

Barclays economists lowered their estimate of first-quarter gross domestic product by 1.2 points to 0.5% ahead of Thursday’s release.

Bill Hwang of Archegos Capital Management was reportedly arrested for misleading Wall Street banks about his holdings.

The market

ES00 US Stock Futures

aimed higher after the 2.8% nosedive in the S&P 500 SPX
on Tuesday, sending the index down 13% from its all-time high earlier in the year.

The 10-year Treasury yield BX:TMUBMUSD10Y
fell to 2.74%. The Euro EURUSD
hit a new five-year low against the dollar.

The best tickers

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Back on Earth, CERN’s particle accelerator has restarted after a three-year hiatus.

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