Why are bond yields in a 30 year bear market?

This isn’t a post. It’s an open question.

Why are bond yields in a 30 year bear market?

The forces propelling bond yields lower over 30 years must be extremely powerful.

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Guest
4 years 7 months ago

I think it all started with the Volcker Disinflation. The thing to remember is that they were in a 30 year bull market prior to that.

I think there’s a feeling among monetary and fiscal authorities of “never again.”

Remember during Clinton’s term where after meeting with Greenspan he was talked into not doing anything that would upset the phantom bond vigilantes?

Overall, there may have been other factors but I don’t think it was an accident.

Though I’m a skeptic of him, Sumner did recently make an interesting point that while we see a 7% yield in a euro coutries bond as a nightmare scenario, historically a 7% yield is not so high.

A few years ago most countries had yileds that level and it wasn’t considered an emergency. Indeed in the 70s that would have been a thing of envy.

Sumner’s explanation is predictable-the reason a 7% yield is unsustainable in the ero countries today is because of flagging or negative NGDP

Guest
Erik V
4 years 7 months ago

It’s because of the way fiscal, monetary and trade policy have been conducted during the last 30 years. The economy operates below potential almost all of the time because 1) Trade deficits create demand leakages and 2) Deficit-hysteria never allow fiscal deficits large enough to keep AD high enough. The Fed has to lower rates each recession to boost the economy, but since we never operate at full potential, the Fed never raises rates during recoveries to get back to the levels of the previous expansion.

So through each recesssion/expansion cycle we get a lower trough and and lower peak in rates. Now we’ve hit the zero bound and the game is over, either policy makers wake up and start using fiscal policy in sufficient amounts or we’ll be stuck in a Japan style BSR for years to come.

Guest
Tom Hickey
4 years 7 months ago

Would suggest saving preference over investment preference, likely due to falling profit rate, declining innovation, and lack of attractive investment opportunities. It’s about risk-weighted return. Many savvy people are preferring bonds in this calculation.

This is a big reason for the strong push toward greater liberalization. The argument is that regulation is constricting investment opportunity.

Guest
Min
4 years 7 months ago

“Many savvy people are preferring bonds in this calculation.”

Wouldn’t that make for a bull market in bonds, not a bear market?

Guest
Min
4 years 7 months ago

OIC. A **bear** market in bond **yields**. Thanks for the obfuscation.

Guest
Detroit dan
4 years 7 months ago

Too easy! Globalization. That has put tremendous downward pressure on wages…

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