Based on these two historical precedents I predicted in 1982 that the bond market would rally and long term interest rates would drop for the next 25-30 years. Now in 2008 we are 27 years into this bull market. As I write this the yield on the 30 year treasury bond is 3.35%, the lowest it has been since 1981 when it had reached a high of 15.31%. The yield on the 1o year treasury note is now 2.85%, also the lowest reading since 1981 when it had reached a high of 15.96%.
I think the drop in yields and the bull market in bond prices which began in 1981 is just about over. We may see the 30 year bond drop a little more, say to 3.00% and the 10 year note to 2.50%. But looking beyond the next six months I think we shall see the start of along term bear market in bonds. I suspect that it will accompany a persistent attempt by governments around the world to inflate themselves out of the long term pension and health care obligations they have assumed toward their older citizens.
Added later: In case you are wondering, this is the first time in 27 years that I have said that I thought that the long term trend in bond prices was about to turn downward.