Much discussion has been taking place regarding the 40 year bond bull market and what happens next. Yes, the long bond bull market(declining rates) is over. What needs to be differentiated though, is what happens in the medium and long term. In the long term (5-20+) years, interest rates should be either rising or at least remaining high compared to the last twenty year period of zero to two percent rates. However, the current situation suggests that a bond rally(drop in rates for a 6-12 month period is likely, either because the stock market declines by 30-50% and or a financial accident in the banking system occurs. Since the FED dramatically lowered the likelihood of the banking system imploding (at least in the short term)with the funding facility they put in place back in March, the more likely catalyst, is a severe stock market decline. This won’t end the period of higher rates for longer, but represents a temporary retracement in rates for six months to a year.