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2021-09-24

Surging Bond Yields

Are the Stock Market’s Next Problem

A sub-2% yield on the long bond and a 1.4% rate on 10-year Treasuries is still nothing to write home about, of course, and neither could be considered a true “alternative.” 

Until there’s evidence to the contrary, it’s simply too painful for investors to bet against stocks “only going up.”

But if central banks follow through on dialing back accommodation in the face of roaring markets and wealth accumulation

Bloomberg  23 September 2021

https://www.bloomberg.com/opinion/articles/2021-09-23/surging-bond-yields-are-the-stock-market-s-next-problem


US taper may be steeper, and its first rate rise sooner, than expected

https://www.ft.com/content/becc9a89-6c06-4ace-a380-736cedb2fcc1


There could be a grave error of first tapering off asset purchases and only later raising rates

Raising rates while keeping the liquidity going would discourage yet more debt issuance, while ensuring that existing debt can be rolled over safely. 

That way, conceivably, it might be possible to retreat from the current extraordinarily lenient financial conditions without creating a crisis along the way. 

John Authers Bloomberg 9 september 2021


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