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Investment expert Bryan Perry shares his insight into factors that affect bond yields, including interest rates and inflation.

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Concerns about Bond Yields Warrant Investor Attention

Investment expert Bryan Perry shares his insight into factors that affect bond yields, including interest rates and inflation.

Of the many news feeds and funnels of research that I pan through every day, once in a while an article or note will send off a warning flare that gets my attention.

Late last week, FINSUM (Financial News Summarized) reported that Larry Summers, of Harvard University, had been warning lately about market dangers. However, now a new warning shot has come out of the university. A PhD candidate there, who is also a visiting researcher at the Bank of England, said that the bond market is set for a crisis worse than that which struck in 1994.

This student is doing his PhD on bond crises, and based on his models, the market looks set for a worse reversal than in â??94, when 10-year Treasury yields rose from 5.6% in January to 8% in November while the Fed doubled benchmark rates. Summarizing the researcherâ??s views, the report indicated, â??The current bond market is facing the â??perfect stormâ?? of potential steepening of the bond yield curve, monetary policy tightening and a multi-year period of sustained losses due to a â??structuralâ?? return of inflation resembling that of 1967.â?

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Concerns about Bond Yields Warrant Investor Attention

Of the many news feeds and funnels of research that I pan through every day, once in a while an article or note will send off a warning flare that gets my attention.

Late last week, FINSUM (Financial News Summarized) reported that Larry Summers, of Harvard University, had been warning lately about market dangers. However, now a new warning shot has come out of the university. A PhD candidate there, who is also a visiting researcher at the Bank of England, said that the bond market is set for a crisis worse than that which struck in 1994.

This student is doing his PhD on bond crises, and based on his models, the market looks set for a worse reversal than in ’94, when 10-year Treasury yields rose from 5.6% in January to 8% in November while the Fed doubled benchmark rates. Summarizing the researcher’s views, the report indicated, “The current bond market is facing the ‘perfect storm’ of potential steepening of the bond yield curve, monetary policy tightening and a multi-year period of sustained losses due to a ‘structural’ return of inflation resembling that of 1967.”

To read the rest of this article, click here.

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