Bonds bubble about to pop? 10y govt bond yields on both sides of the Atlantic have jumped to critical levels. Could break out every minute. Japan’s yields alone remain artificially depressed by BoJ’s Yield Curve Control.
@Schuldensuehner
can you guess what happens to consumer sentiment when interest rates rise? pic.twitter.com/iPO96bMBaL
— Alastair Williamson (@StockBoardAsset) January 27, 2018
Global 10-yr yields…
US: 2.66% (highest since Apr '14)
UK: 1.44% (highest since Jan '17)
Germany: 0.63% (highest since Dec '15)
Japan: 0.08% (highest since Jul '17) pic.twitter.com/DoqgXrwSrq— Charlie Bilello (@charliebilello) January 27, 2018
Ever since President Trump entered office, the world has sold bonds and dollars. Lol, this is not what you want if you're in the business of selling US debt. pic.twitter.com/xlcOL1A9Pw
— Alastair Williamson (@StockBoardAsset) January 27, 2018
Quick reminder of the main premise: The world is so indebted courtesy of artificial low rates that rising rates will present a clear and present danger to the sustainability of economic growth in the long term.
Hence a couple of key data developments in recent days.
Firstly the 10 year has now broken above its long term trend:
Every time the 10 year has come close to its trend it produced a rejection in many cases because the Fed had to intervene as stock prices collapsed. We saw it in 2000 and 2007, but also in the early 1990s.
So what you say, the 10 year is still historically low. Oh yea?
Watch this:
Interest payments on debt for the US government flew to a record high in Q4. And no, this is not only driven by increased deficit spending ( and much more to come), this is simply a reflection of the Fed having raised rates by the tiny amounts they have implemented so far:
Interest rate intervention is a tax on savers. The market should be determining the interest rates.