InternationalMarkets & Economy

Long-term rates fell last week — the cause? Trouble overseas

The IMF (International Monetary Fund) is also an attending physician and today very much out of character, issuing warning after warning
  • When global risk rises, money flows to the yen.
  • For the first time since the Federal Reserve began to release its meeting minutes a dozen years ago, this most recent set is dominated by concern for the outside world.
  • A quick scan overseas: Europe is either in or close to real deflation, resistant to the ECB’s massive bond-buying. Same in Japan but worse, negative rates causing more panic than help in its demographic implosion. China is of course the whale, its internal tinkering unsustainable but keeping the show going for now.

Long-term rates fell last week -- only about one-eighth of 1 percent, but when the world is so close to zero or below it, any drop seems big. The 10-year T-note settled just under 1.75 percent, and low-fee mortgages near 3.75 percent. The cause, again: trouble overseas. Other markets -- stocks, currencies, commodities -- continued a new-age pattern increasingly prevalent. Global trading today is dominated by computers diddling each other. One-third of Goldman employees are IT dweebs who don’t know a euro from a Yugo but can make a ton of money trading math, so long as economic fundamentals stay within the range of recent history. Thus, we see every day the truly idiotic tail-chasing of oil by global stocks, and perhaps the all-time silliest self-perpetuator: When global risk rises, money flows to the yen. Why anyone would see the yen as a safe haven is beyond me. Mathematical habit and arcane currency “carry-trading,” but on the yen trade goes without significance. ...