NEW YORK -- Inflation is low, U.S. bonds offer higher yields than in most other countries and the government is paying off debt. So why are investors sour on bonds?
It's the nagging concern that relentless economic growth -- evidenced by jobs, manufacturing, earnings and spending -- will lead to inflation later."The economy is firing in all cylinders," said Kevin Kennedy, a portfolio investor at Citibank Global Asset Management, with $32 billion of bonds under management. "Growth has to slow a little bit, or there will be inflation pressures."
Bond investors fear inflation because it erodes the value of their interest payments. Federal Reserve Chairman Alan Greenspan is concerned, too.