Record-Low Bond Yields

Bond yields continue to decline for now –  FT update here.



13 replies on “Record-Low Bond Yields”

The financial crisis has resulted in many records being broken and the Dutch 10-year yields at 1.32% haven’t been as low since data begins in 1517.

Spain at 2.47% is the lowest since 1789 and France’s rate is at a 250-year low.

Italian yields peak for the year 2012 was at 6.6% on July 24th and the level today is 2.65% and in data going back to 1808, Italy has only been lower in the months following the end of war in Europe in 1945.

The Ukraine-Russian crisis plus sluggish Eurozone growth are factors.

The Irish rate today is at 2.17% and the lowest rate among developed countries is Switzerland’s at 0.48% compared with US at 2.47% and the UK at 2.56%.

Borrowing costs in the UK tumbled to the lowest level for more than 300 years in January 2012 as the Eurozone crisis triggered demand for safe investments.

The yield on 10-year gilts dropped to a record low of 1.92%.

That was below the previous low of 1.96 per cent recorded in 1897 and the lowest level since Bank of England records started in 1703.

The threat of deflation in Europe is also a factor compared with the UK and US.

I wrote about historical low rates in 2012:

Debt sales with interest rates at lowest levels since Babylonian Empire

We need to swap that IMF loan for some of this cheap stuff, stat. How about Dart Underground? He’ll, an Irish Sea Dublin-Wales tunnel could prove feasible with money that cheap 🙂

@Philip Lane

Hope you enjoyed the break!

@Michael Hennigan

Minor point:The Cheneyite Nuland manufactured Ukraine-Russia crisis

And with bond yields so low, and loads of corporate and oligarchic cash around, methinks many are skipping said bonds and simply taking over states: Ireland was a doddle; Ukraine is a geopolitical/economic ‘grab’ (as was/is modern Babylon & Libya)

@That’s legal

Oh Dear! Why not CEASE all interest payments until such time as a ‘reasonably pragmatic’ deal on 40% of the cost of EZ ‘banking’ crisis is struck?

If the yields are unprecedented, perhaps the fallout of any unwinding will be unprecedented……however I agree with the article that it’s sensible to conclude the ECB is going to keep monetary policy relaxed for some time.

However if Europe is aging demographically, won’t this supply serious downward pressure on yields in the longer term, all those pension funds have annuities to sell, which are financed via low risk government bonds

When Picketty indicated that the low growth scenario might be with us for a considerable period of time aka decades there were many raised eyebrows particularly from political circles given the increased level of inequality this will bring, according to Picketty’s analysis.

Given the signals that bond yields such as those we are now experiencing tend to suggest, perhaps Pickettys outlook of growth rates of barely above 0% could be very close to the money.

As per normal only time will tell – in this case a long time.

@ Rory,

you are right for the US and probably other english speaking countries.
offered frequently (at least semi-monthly) updated quotes on US annuities.

One could actually calculate them in good approximation (within 0.2%) by

insurance payout = ( 1 / life expectancy (LE)
+ tip10 ) / ( 1 + 15% profit )

for the inflation ridder option, age 55, as my reference

quoting became erratic after April 2012, and is now not updated since a year, since the payout is just horrible.

German annuities have a very low guarantee payout, and are backed by about half by real estate, making the system a lot more robust.

The “reference rate” now dropped to typically 3.5 – 4%, which would be comparable as the US TIPS rate + 1%, and explaining this would take at least one full page with numerous equations. That would give you a realistic payout of 4.8% at age 67. This makes kinda fake employment up to age 67 actually attractive for certain groups, in contrast to this recent brouhaha about pension at 63 : – )

@ YoB

US rates are planned by the Fed to be back to normal in mid 2017, and I do not expect the ECB to be more than 1 – 2 years delayed, 3 would already be a stretch. For coming in within 1 % of “normal”.

There be Vultures!

Today is technically the drop-dead date for Argentina to work out an agreement to pay off vulture funds that long ago purchased their distressed debt, or else the country will go into default for the second time in thirteen years. 11th-hour negotiations with a mediator have yielded no results thus far. WSJ divines momentum from the length of the mediation session, which is pretty weak tea. The default would actually be to the exchange bondholders who already hold agreements with Argentina for restructured debt payments going back to the 2001 default. Judge Thomas Griesa prevented the country from making a scheduled interest payment to the exchange bondholders without the vulture funds getting their $1.5 billion first (the vultures paid roughly $48 million for the distressed debt, so it’s a huge payday). [

Argentina Deadline Day: Punishment for Rejecting the Neoliberal Consensus Nearly Complete
Posted on July 30, 2014 by David Dayen

The System of Law mediates the relationship between the Systems of Money & Power and the Lifeworld of the humble Citizenry; to the benefit of the Systems of Money & Power as the Argentinian citizen-serfs are loaded with the Vultures’ Bill

Reminds me of somewhere else? …. must look around!

Vultures contd.

Economists Call on Congress to Mitigate Fallout from Ruling on Argentine Debt

Decision “could cause unnecessary economic damage to the international financial system”

WASHINGTON – Over 100 economists, including Nobel laureate Robert Solow, Branko Milanovic and Dani Rodrik called on Congress today to take action to mitigate the harmful fallout from the recent ruling by Judge Griesa of the U.S. District Court for the Southern District of New York that requires Argentina to pay holdout creditors at the same time as the majority of creditors. The letter warns that “The District Court’s decision – and especially its injunction that is currently blocking Argentina from making payments to 93 percent of its foreign bondholders — could cause unnecessary economic damage to the international financial system, as well as to U.S. economic interests, Argentina, and fifteen years of U.S. bi-partisan debt relief policy.”

“It’s a widely shared opinion among economists that the court’s attempt to force Argentina into a default that nobody – not the debtor nor more than 90 percent of creditors – wants, is wrong and damaging,” said Mark Weisbrot, economist and Co-Director of the Center for Economic and Policy Research, who helped circulate the letter.

The letter warns that Griesa’s decision could “torpedo an existing agreement with those bondholders who chose to negotiate.” It also cautions that, since sovereign governments do not have the option of declaring bankruptcy, “the court’s ruling would severely hamper the ability of creditors and debtors to conclude an orderly restructuring should a sovereign debt crisis occur. This could have a significant negative impact on the functioning of international financial markets, as the International Monetary Fund has repeatedly warned.“

The court’s decision “creates a moral hazard,” the economists write, since investors will be allowed “to obtain full repayment, no matter how risky the initial investment.”

The full letter appears below.

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