NEW YORK ( TheStreet) -- Quantitative easing, which has kept yields on bonds artificially low and has investors flocking to risky assets such as stocks and commodities, is widely expected to end in June.
But market analysts say investors should continue to bet on stocks and commodities even after the Federal Reserve ends its $600 billion bond-buying program -- known as QE2 -- as bonds will prove to be an unsafe alternative.
A combination of recovery expectations, inflation risks and worries about the massive federal deficit have been pressuring bonds and lifting yields -- bond prices and yields share an inverse relationship. But with the Fed stepping in to buy up Treasury notes, analysts say the rise in yields has been relatively modest. The intention of the Fed's purchases is to dampen interest rates, so as not to threaten an economic rebound.
However, once QE2 ends, bonds could sell off further, causing yields to climb higher. And the central bank might be forced to hike short-term interest rates eventually, as economic growth returns and inflation spikes, hurting bonds further and making them an unsafe investment for investors. The biggest bear signal for bonds yet came last month, when
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