In a recent Globe column, I highlighted a consensus among money managers that interest rates are unsustainably low - short and mid-term Government of Canada bonds are trading at negative ‘real’ yields (after inflation). The argument goes that at some point safety conscious investors will shift their focus back to equities and the remaining (less urgent) bond buyers will demand higher yields.

I also noted that there’s an equally strong consensus that interest rates aren’t going up soon. The economy is too weak to support higher yields and the flight to safety will continue due to Europe’s shaky finances and America’s debt denial.

From the managers I read and talk to (a broad sample, but not statistically significant), these views are translating into bond portfolios that are neutral or only slightly short on duration (a measure of interest rate sensitivity). Bond managers are wary of rates, but aren’t willing to get too defensive because it means bringing down the current yield on their portfolios. If rates don’t go up soon, they’ll find themselves lagging behind their benchmark, the DEX Universe Bond Index. They all say, and this is the point of this post, that they stand ready to move quickly when the market turns.

As much as any time in my career, it feels like everyone in the theatre is planning to do the same thing. At the first sign of smoke, they’re heading for the exit. If I’m right, when the turn comes, we may see some exaggerated price moves, as the urgency shifts from the buyers to the sellers. With everyone thinking the same way, it may not be the smooth, controlled transition that investors are hoping for.