Looking at the bond market's rapidly sinking yields you might think we are again celebrating the "goldilocks" return.
Unless you think that this is just the usual portfolio shift. The problem with that view is that it assumes a portfolio preference driven by expectations of an inexorably recession-bound economy, or by an impending Armageddon (Middle East, Northeast Asia, etc.) that will somehow spare bonds while killing equities.
Dark scenarios indeed. How about looking at something "boring" like the universal law of price discovery through forces of demand and supply?
For example, during the first quarter of this year the Fed's monetary base exploded with the credit creation (i.e., buying bonds in exchange for cash) to the tune of $324.7 billion, most probably an unprecedented such event since America got its central bank almost 104 years ago.
People and institutions lending their savings to Uncle Sam can be very grateful for the Fed's largesse: A nearly 40 basis point decline of yields on the benchmark ten-year Treasury note in the first three-and-a-half months of this year is a nice return. And, given the Fed's stated intention to let the economy "coast along" its 1.5-2.0 percent growth path, Treasury's creditors may still be tempted to part with more of their loanable funds.