I recently read this in an article about the current state of the bond market:
Coming off a 40-year bull market in bonds, the potential for capital losses on bond investments is very real, and that type of risk is one that many conservative investors won't necessarily appreciate.
What does it mean for bonds to have a 40 year bull market? My understanding of bonds is that their fundamental upside is typically well understood since they become a fixed amount of cash at a fixed date excluding some form of non-payment. There's no reason to "overpay" based on future growth expectations as there would be with stocks.
I'm having a hard time understanding how an instrument like bonds could be overbought over a period on the order of 40 years, since this is longer than a typical bond term. I understand how bond prices will vary with interest rate, but I don't see how they could be significantly overvalued over the long term.
The concept of a "bond bubble" seems to be coming up regularly, so I must not be understanding something. What does this mean?