$TLT is a great proxy for the bond market. If it trades higher bonds are being bought, lower implies bonds being sold. Since the start if the taper bonds have embarked on a strong rally right along side stocks, defying logic that bonds and stocks should move in opposite directions. Recently this trend has started to break. Stocks are pulling back, but bonds are continuing to rally.
Today $TLT broke to a multi-year high on the heals of a record day for bonds over seas. German 10yr notes reached their lowest yield ever at .84% this morning.
What is this telling us? For one its telling us investors are parking their money and expecting very little in return. They are expecting deflation to be an overriding theme. If they are right, bonds will be the place to ride it out while stocks pull back... and if we do get in a deflationary spiral - we could see stocks crash.
But if we've learned anything since the market lows in March 2009, the central banks fear deflation more than a Motley Crew reunion tour. Which means, in spite of what you are seeing in the bond market, this remains a time to be long risk assets. I know the bears have come out of their caves with the recent pull back from all time highs. Some claim we are now in a bear market. Wow.
We are now in a bear market? I don't think so. Key support levels have been breached, but something else we've learned since central banks embarked on their massive easing programs, charts don't matter against entities with limitless money printing power. Money speaks a lot louder than a research report or a craftily lined chart.
In my opinion, the strength we are seeing in the bond market will remain as long as the central banks are buying bonds, but that won't mean stocks will suffer.
German government bonds surged to their strongest level on record and U.S. Treasury bonds soared on Tuesday, with investors fleeing to the safety of high-grade debt amid further signs that the economic recovery in the eurozone has hit the buffers.
Stock markets in Europe took a fresh tumble, echoing Monday's late dive on Wall Street.
The moves came after a closely watched indicator showed an unexpected sharp slump in German economic sentiment in September. Germany's ZEW research institute said it couldn't rule out a recession in the third quarter in Europe's largest economy.
The German economics ministry on Tuesday slashed its forecasts for growth in 2014 and 2015.
German 10-year yields fell to a record low of 0.84%, and 10-year U.S. Treasury yields fell to a 16-month low of 2.18% as the market reopened after Monday's public holiday.
Yields on bonds issued by a host of smaller eurozone countries perceived as safe by investors, including Austria, Finland, and the Netherlands, also sank to record lows Tuesday.
"Bonds are currently finding support from a multitude of sources, and even though the yields on offer look almost ridiculous in a longer-term perspective, even lower yields are ahead," said Jan von Gerich, chief strategist at Nordea.
"Geopolitical tensions abound, there is no sign of inflation virtually anywhere, euro-area recession has become a hot topic again, risk appetite has been dented, while there are signs of central banks softening their rhetoric further. The natural question that arises is have yields already fallen enough. A short answer is no," he added.
In equity markets, the Stoxx Europe 600 index was 1.2% lower midway through the session, as Monday's stabilization of markets proved fleeting.
In the U.S., the S&P 500 had fallen 1.7% on Monday, hit by persistent jitters about the weakness of global growth. U.S. stock futures gave up early gains to point to a flat open for the S&P. Changes in futures aren't necessarily reflected in market moves after the opening bell.
Despite a recent decline in stock valuations, indexes are likely to remain under pressure unless some upbeat earnings news can lure buyers back to the market, said Guy Foster, head of portfolio strategy at Brewin Dolphin, which manages GBP26 billion ($41.8 billion) of assets.
"The market is approaching oversold territory, but investors are reluctant to carry a lot of risk into earnings season," he said.
Adding to those concerns, fears over the spread of the Ebola virus weighed on markets, and particularly on travel companies' shares.
The European Union confirmed on Monday that it has convened a meeting of health ministers for Thursday to discuss screening of possible Ebola victims when they enter the 28-nation bloc.
Inflation data also fanned fears over global growth. Figures for France, Italy and Spain all fell short of expectations, continuing to show anemic consumer price growth in September.
The figures dented the euro, interrupting its recent rebound against the dollar. The common currency was 0.7% lower at $1.2658.
Data from the U.K. painted a similar picture, with the annual inflation rate unexpectedly falling to 1.2% last month. The British pound fell 1.1% to $1.5915, an 11-month low against the dollar.
In commodities, gold was 0.5% higher at $1,236 an ounce and Brent crude oil was down 1.6% at $87.43 a barrel.
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Read more: http://www.nasdaq.com/article/german-bonds-surge-to-record-levels-20141014-00289#ixzz3G8McbRNa