Bonds have a distinct seasonality, which is very similar to that of stocks.
I discovered it many years ago when I was managing $3 billion of interest rates derivatives for a large corporation. I always benefited when I followed this simple rule.
Yields tend to rise (bond prices decline) in the first half of the year. Yields tend to decline (bond prices rise) in the second half of the year.
Why? My guess is that large corporations arrange their borrowings in the first half of the year, following the approval of investment budgets by the board at the end of the fourth quarter.
What is really interesting is that stocks have the opposite seasonality. They tend to rise in first half of the year and become dormant in the second half.
George Dagnino
aka Peter Dag
www.peterdag.com
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