Bond Buyers Poised to Return If Inflation and Yields Drop
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The biggest bond buyers are pension funds, asset managers, insurance companies, and foreign investors - not central banks like the Fed. These make up 60%+ of net buying flows.
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These institutional investors buy bonds because the high guaranteed yields help them meet return targets while hedging interest rate risk.
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Bonds can stabilize portfolios when risk assets decline, but only when inflation is low and predictable below 3%.
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If inflation falls sustainably below 3%, the negative stock-bond correlation may return, making bonds attractive again.
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These "bond whales" have been dormant lately, but their buying power is larger than the Fed's and could ignite if inflation and yields fall.