InternationalInvesting

Will interest rates go up on Wednesday? Low bond yields throw in a wrench

Asserted, but not true: the record lows are the result of bad policy at central banks
  • Sovereign bond yield marks the next step in an ultimate global resolution, but one which none of us can predict in timing, character, or scope.
  • Since 1990 the West (to include Japan) has been borrowing furiously to defend social-spending promises which cannot be supported by GDP (gross domestic product) growth.
  • That scene is the reason that markets are looking right through central bank efforts to drive them away from sovereign safety. Piling in more every day.

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

So, what’s the big deal with a five-one-hundredths percent decline in the yield on 10-year T-notes? What does sovereign bond yield have to do with anything? It marks the next step in an ultimate global resolution, but one which none of us can predict in timing, character, or scope. But, think big. Earthquake. Tectonic. Not necessarily an apocalypse! Not at all. The jolt when it comes will likely be progressive, moving from one nation/region to another, and with only moderate luck will accelerate a long-deferred process of rationalization and healing. Back to the 0.05 percent drop. The all-time low yield on 10s was 1.45 percent on July 26, 2012, pushed down by the Fed’s aggressive bond-buying in QE3. Since then 10s have mostly traded above 2.00 percent. Until this spring. At the New Year everyone knew 10s would rise from 2.24 percent, but they promptly fell to 1.70 percent in February, and tried that level again in April and May, and could not break lower. Did last...