Vincent Deluard from INTL FC Stone admits that he, like many other analysts and investors, was caught off guard by the 60 basis point drop in 10-year yields. In two notes published in October and November he argued strongly for a secular bear market for bonds, and the purpose of this note is to first explain the things had underestimated, and secondly to reassess his broader long-term thesis. It’s what any good analyst should do. Deluard says the drop in nominal yields is a reaction to an inflation surprise from oil prices and he probably understimated the one sided nature of positioning, and the power of that punch. However, this does not change Deluard’s glut/savings squeeze thesis, which was the subject of his October and November pieces, where he argued for higher rates because of 3 major savings gluts that are draining the system of global liquidity. He sticks with the view and argues that who bear markets can experience a short-term correction rally, and that’s what we’ve just experienced.