Running Man, You may find the below numbers and info interesting...This comes from South Gent who posts a blog on SA. A very informed man and I enjoy his writings.
Author’s reply » G: The 1945-1951 period is instructive on two points.
The FED was able to peg the ten year treasury yield near 2.5% when inflation was running hot in the 1940s. That is just a fact.
http://bit.ly/yqwPit
And, the intervention now is more pervasive and substantial than that earlier time and has been aided and abetted by similar or more market manipulative policies by other major CBs.
The second point is that a long term bear market in bonds started when the FED ceased its intervention. That is another fact which can not be disputed. The bear market ended up being 32 or so years in duration:
"A Quick Look At The 10-Year Treasury Yield Since George Washington Was In The White House"
http://read.bi/UIAK2g
Fearful Symmetry: Six Decades of Treasury Yields
http://bit.ly/29yI64S
Once the CB intervention ceases, and the market starts to set rates again based on traditional and well understood criteria like credit and inflation risks, interest rates normalize even with benign inflation numbers continuing during the normalization process.
The rise in rates could be made worse when the normalization process is accompanied by a rise in inflation and inflation expectations which are currently abnormally low as well.
Even with benign inflation between 1952-1966, compared to the 1945-1951 period, the ten year treasury yield jumped to a series of new and higher ranges after the FED ceased its intervention. The jump was from a 2.2%-2.5% range to higher ranges before tipping over 4% in 1959.
I would call the gradual rise from 2.2%-2.5% to a 4.6% ten year yield by 1966 to be part of a rate normalization process occurring during a transition from CB manipulated rates to abnormally low levels to market set rates at traditional spreads to inflation and inflation expectations.
A normal spread to inflation would inevitably cause significant price deterioration in the artificially low vintage yields which happened throughout the 1950s.
Later on, the problems morphed into a far more deadly bear market for bonds when inflation started to turn up in the late 1960s and then quickly moved into clearly problematic levels for both stock and bonds.
The first leg of a bond bear market does not have to be caused by a persistent rise in inflation and an upward change in inflation expectations.
The bear market can be a CB created phenomenon resulting from keeping rates artificially low for too long which describes what has already happened IMO.
Rather than this practice being limited to one or two CBs, it has now spread worldwide and has resulted in something truly unprecedented in history-the creation of over $12 trillion in negative yields where lenders pay borrowers to accept a loan. The world has literally been turned upside down by the collective actions of CBs and they should bear the blame for the potential adverse consequences.
Ten Year Treasury 1942-1950
Jan 1, 19502.32%
Jan 1, 19492.31%
Jan 1, 19482.44%
Jan 1, 19472.25%
Jan 1, 19462.19%
Jan 1, 19452.37%
Jan 1, 19442.48%
Jan 1, 19432.47%
Jan 1, 19422.46%
Those are annual numbers, but can be broken down into months:
http://bit.ly/2ceL9Qg
Inflation: 1942 to 1952:
Jan 1, 19524.33%
Jan 1, 19518.09%
Jan 1, 1950-2.08%
Jan 1, 19491.27%
Jan 1, 194810.23%
Jan 1, 194718.13%
Jan 1, 19462.25%
Jan 1, 19452.30%
Jan 1, 19442.96%
Jan 1, 19437.64%
Jan 1, 194211.35%
Inflation 1952 through 1965:
Jan 1, 19650.97%
Jan 1, 19641.64%
Jan 1, 19631.33%
Jan 1, 19620.67%
Jan 1, 19611.71%
Jan 1, 19601.03%
Jan 1, 19591.40%
Jan 1, 19583.62%
Jan 1, 19572.99%
Jan 1, 19560.37%
Jan 1, 1955-0.74%
Jan 1, 19541.13%
Jan 1, 19530.38%
Jan 1, 19524.33%
Compare with
Ten Year Treasury 1952-1966:
Jan 1, 19654.19%
Jan 1, 19644.17%
Jan 1, 19633.83%
Jan 1, 19624.08%
Jan 1, 19613.84%
Jan 1, 19604.72%
Jan 1, 19594.02%
Jan 1, 19583.09%
Jan 1, 19573.46%
Jan 1, 19562.90%
Jan 1, 19552.61%
Jan 1, 19542.48%
Jan 1, 19532.83%
Jan 1, 19522.68%
When a ball is held under water and is then allowed to act on its own, it will rise to the surface. The differences in the ten year yields for these two distinct earlier periods is not explained by inflation but by the FED's starting and then stopping CB created interest rates. Inflation went down and bond yields rose! So the piper gets paid in the end.
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