Bond prices will dip severely soon, warns Kevin Ferry, president of Cronus Futures Management.
The bond market is headed for the end of a cycle, he explained to CNBC.
"Everyone wanted a piece of the inflationary theme when the Fed went to quantitative easing. They got killed. So now they're seeing the other side. That's indicative in our mind of a last-ditch, crazy fifth wave. We're in that final stage,” he said.
The Ultra Long-Term U.S. Treasury Bond Futures contract has been a haven to hedge against deflation.
“There are enough deflationary headwinds, especially with this forced austerity, to think that another grab for duration is not out of the question,” he said.
There are signs that inflation is looming and the Ultra has been the marker for movements in the bond market, Ferry said.
“It's leading every single market move up when there's trouble and every single rejection when people think things are OK,” he said.
The flight to Treasuries by investors is excessive and is “another indication of how bubblicious this market has become,” said Michael Pento, chief strategist at Delta Global Advisors.
The United States will have to allocate 30 to 50 percent of its revenue by 2015 just to make payments on its debt, resulting in higher interest rates and a lack of interest in bonds, he said.
“You have exploding deficits, you have skyrocketing interest rates, people selling your currency — you have economic catastrophe,” Pento said.
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