Lest the title gave you the wrong impression, no, we’re not about to call a top in the US bond market. The generational bull has not been kind to such efforts in the past. But that doesn’t mean others aren’t still going to trot out their predictions – like this (somewhat misleadingly-titled) article from MarketWatch: “Signs that bond market finally has topped”

How will we know when the great bond market finally tops out—for good?

It’s an urgent question, since the chorus of those predicting that a top is at hand—a chorus that has continued for years now, even as the unprecedented bond bull market has kept chugging along—has recently reached a crescendo. Needless to say, someday these stubborn bears will be right—might it be now?…

While it’s always possible that the great bond bull market is, or already has, come to an end, the top performing bond market timers are betting strongly that the bull is still alive and kicking. Not only are they very bullish in their own right, they are far more bullish than the bond timers with the worst track records.

Let’s see if we have this straight: the bond market managers who made money by being bullish on bonds… are still bullish on bonds. And the bond market managers who lost money by being bearish on bonds… are still bearish on bonds. How enlightening.

Truth is, the 30-year decline in US bond yields (and corresponding bull market for bond prices) has had naysayers and defenders for a long time, and that’s not likely to change any time soon. When you look at the chart:

Is it begging for a reversion to the mean, or do we have another 30 years of low yields in store? Without a crystal ball, we don’t think endless prognostication is all that helpful. The article does get one thing right – eventually someone predicting the end of the bond bull is going to be right. However, it’s also inevitable that the road to that day will be littered with the failed predictions of those who called the top too early.

Instead of trying to time the market or predict the future, we prefer the managed futures approach: buy bonds and keep with the rally when prices breakout higher (they can do that even at the zero bound because of future expectations of rates), and sell bonds when they breakout lower, risking a small amount in hopes of the break finally being the big one. And if it isn’t, lose just that small amount. Eventually, we believe managed futures outlier gains on the bond market downside – when it comes – will more than offset the false breakout losses along the way (even if it takes years of such false breakouts).