"I know its conventional wisdom to be bearish US bonds, but it might be worthwhile to ponder an alternative opinion from a successful manager. Hoisington Management has been consistently bullish long US governments for more than a decade, and sees no reason to alter course despite the recent backup. Their latest piece is worth reading."

David Fuller's view Thanks for this topical email and the report.

If it is "conventional wisdom to be bearish of bonds", that strikes me as a relatively recent development.

I enjoyed the Hoisington Quarterly Review and Outlook, particularly the last three pages. Forgive me if I summarise this inadequately after a quick reading, but I believe they are saying that debt levels are too high to generate growth, and deflation is more likely than inflation. These are important points and well made by Reinhardt and Rogoff, and others whom they also quote. It is also a much longer-term view which is unlikely to be proven or disproven anytime soon.

What is either not mentioned or under mentioned, is that the bond bull market was given a new lease of life by Mr Bernanke's misnamed 'QE in perpetuity'. Moreover, T-Bond yields fell to near record or actual record lows during the momentum buying. Clearly, plenty of these people are now exiting bonds because they are experiencing profit erosion or actual losses, the US fixed interest sector has also been underperforming the DJIA over approximately the last two years.

A risk for Hoisington is that by disregarding this point immediately above, they are vulnerable to further profit erosion. If that proves to be a sufficient reason for a meaningful number of their clients to abandon bonds, Hoisington could find itself having to make forced sales in a weak market in order to return funds to departing investors.