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One of the most crowded trades on Wall Street is about to implode, says one market watcher.
“We’re in an epic bubble of colossal proportions,” Peter Boockvar, managing director and chief market analyst at The Lindsey Group, said Tuesday on CNBC‘s “Futures Now” in reference to the fixed income market.
Global yields have been tumbling to record lows, with many dipping into negative territory. The U.S. 10-year hit its lowest level ever this week as traders continue to seek safety in the bond markets.
However, Boockvar believes that this activity is a ticking time bomb for the global economy. He reasoned that U.S. Treasury yields are being dragged down by negative-yielding debt out of Germany, Japan and Switzerland and misplaced monetary policy, and is therefore skeptical as to how much longer the rally can continue.
“It could be central banks that end this,” said Boockvar in regard to upward momentum for bonds. In his recent coverage, he reacted to the newly released FOMC minutes and further questioned the Fed’s ability to act effectively.
“They’ll call it being ‘patient.’ Their forecasts are now irrelevant, their communication is now meaningless and their tools to handle whatever might come our way are toothless,” noted Boockvar when describing the Fed’s ability to address a flattening yield curve.”