One of the greatest mysteries confronting the markets is the obdurate persistence of low real bond yields Authers Plender
(obdurate: stubbornly persistent in wrongdoing)
In the case of 10-year TIPS yields for the U.S., they have managed to fall once again below the once-inconceivable minus-1% level. Yields like that are not supposed to happen, and certainly not when the economy is growing and people are worried about inflation.
Biden’s political difficulties have multiplied with startling speed.
That leads to the risk that it waits too long to raise rates, allows inflation to take hold, and has to raise rates more in consequence. That is the kind of miserable prospect that might make it sensible to accept a negative real yield.
Can I summarize all of this neatly? No, not really. A few decades from now, it will be obvious what was going on as the world tried to emerge from the pandemic. At present, all that is clear is that things are changing profoundly.
Q: What’s the difference between a Bond and a bond trader?
A: A Bond matures.
James Bond has a license to kill, so does the long bond
John Authers Bloomberg 15 October 2021
IMF says that there is significant uncertainty about the effect of normalisation on asset prices
In its latest Global Financial Stability Report.
The central bankers know this ... there could be a behavioural bias towards caution and delay in tightening.
Yet investors’ deep seated conviction that monetary authorities will always come to the rescue if markets tank suggests that weakness in bond and equity prices will not turn into a rout just yet.
John Plender 15 October 2021
https://www.ft.com/content/9e1e5a9f-cc09-409b-b2ee-4d69fd153cbe
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