Wednesday, August 22, 2007

Bonds are rallying

U.S. bonds for the past two weeks are rallying due to carnage in the stocks, as investors/traders flock to safer money avenues in these highly uncertain and volatile times in order to protect their capital from any sharp drop in stocks.

They are not bothered at the moment about low returns from bonds but rather concerned about capital erosion from risky assets like stocks. They are right in their approach as sometimes remaining in cash can give excellent buying opportunities in blue chip stocks in case they fall sharply because of some external reasons not related to their business performance.