“People are worried about German/French/Italian/Japanese/Swiss/Canadian solvency” [1]
“Germany’s benchmark 10-year bund yield was last seen trading at a 15-year high, while its French counterpart reached its highest yield since 2008. Japan’s 10-year bond yield rose to 2.954%, topping the 40-year high seen in the spring. Yields also spiked across the curve on British, Italian, Swiss and Canadian government bonds.”
Please let me know when it's time to max out my credit cards to buy gold.
xkcd1963 15 hours ago [-]
Based on your commentary on HN you have very low credit score.
mono442 3 days ago [-]
It's rising because the market expects interest rate hikes. Long-term bonds are basically a prediction market for future interest rates.
adjejmxbdjdn 3 days ago [-]
The 30 year isn’t as affected by interest rate hikes unless the market is signaling it sees long term inflation despite interest rate hikes.
The 30 year should reflect more fundamental issues.
adam_arthur 3 days ago [-]
30y is keyed to inflation expectations.
If fed hiked to 5% tomorrow, 30y would invert and yield would go down.
It's not as simple as hikes lead to higher 30y yields.
vannevar 2 days ago [-]
It's not all inflation expectations, either. The dollar has been strong lately due to elevated oil prices---countries that are short need extra dollars to buy oil, so they often liquidate treasuries to get them.
quickthrowman 2 days ago [-]
You have that backwards. The market sets the long end of the curve via supply and demand,the Fed controls the short end of the curve (federal funds rate)
If the Fed hiked the (short-term) FFR, long term inflation expectations would go down, along with the yield of long duration Treasury bonds.
jgalt212 2 days ago [-]
You are largely correct for the pre QE years. But with QE, bonds further out the curve have been purchased by the Fed, and the yields for such maturities have been artificially suppressed. Warsh, at on time, really cared about this mispricing of risk. We'll see how he feels now that he's got his hand on the rudder and the orange colored man breathing down his neck.
They still own 7X the amount bonds they did pre-GFC, and 75% of what they did at the peak. In short, I posit it still has a massive effect on the yield curve and all assets (US and globally).
mono442 2 days ago [-]
Long-term bonds can be replaced with short-term bonds which are constantly rolled over. It wouldn't make sense if the market was pricing in anything else than future interest rates.
Obscurity4340 3 days ago [-]
Investing in long term bond == expected interest rate hikes?
HSO 3 days ago [-]
yield rising means selling
benj111 2 days ago [-]
Well yes. A stock goes up because people are buying, but that avoids the intent of the question, if they're asking about why the stock is rising.
The answer the GP. The longer term bonds tend to be less impacted by interest rate expectations. Risk feeds into the yield, as does inflation expectations.
burnt-resistor 2 days ago [-]
Financialized AI (debt: ~$2T), private equity (zombie debt: ~$4T), government spending ($7.2T, debt: $39.9T), and the very rich (and up) are the economy right now. Everyone else is/has pulled back and is hurting because of rising prices and job uncertainty.
The 30 year should reflect more fundamental issues.
If fed hiked to 5% tomorrow, 30y would invert and yield would go down.
It's not as simple as hikes lead to higher 30y yields.
If the Fed hiked the (short-term) FFR, long term inflation expectations would go down, along with the yield of long duration Treasury bonds.
The answer the GP. The longer term bonds tend to be less impacted by interest rate expectations. Risk feeds into the yield, as does inflation expectations.
[1] https://www.wsj.com/world/india/500-000-applicants-583-jobs-...
[2] https://www.nytimes.com/2021/07/03/world/asia/china-slackers...