The selloff in T-Bonds has been steep and prolonged, but we are treating it as a correction rather than the beginning of a bear market. Our eventual goal is to stake out a long-term bullish position, much as we did when U.S. bonds were in the takeoff phase of a major rally begun last May. There is a difference this time, however, in that Fed blather has turned hawkish. Under the circumstances, if T-Bond price are to surge once again, it will likely be on perceptions that the U.S. economy is sinking into recession. Clearly, such concerns were not troubling Wall Street on Friday, when buyers went on a wilding spree following reports of better-than-mediocre jobs growth last month. Patience will be required to build a long position in T-Bonds as they continue to correct and eventually base. My strong gut feeling, however, is that it will be worth the wait and the effort.
