Blame the harsh winter for stifling economic growth or tensions in Ukraine for sparking demand for havens.
Jeffrey Gundlach, the star fixed-income manager whose mutual fund beat 97 percent of its rivals the past three years, has a simpler explanation for why investors have gotten the bond market so wrong this year: the aging of America.
More retirees mean a shrinking workforce, leading to less spending, slower inflation, and greater demand for low-risk, income-producing investments. RBC Capital Markets, one of the 22 dealers obligated to bid at U.S. Treasury auctions, says annual growth in the working-age population will slow to 0.2 percent in the coming decade, from 1.2 percent in the 10 years before the financial crisis. This helps explain why the best and brightest erred in calling for a bear market in U.S. bonds—and why benchmark Treasury yields may stay low for years to come, according to Gundlach.
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