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What's Driving the Historic Bear Market for Bonds?
- incomingpain 5y agoIt's important to note that bonds are barely inverted: https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page https://www.marketwatch.com/investing/bond/tmubmusd10y?count... But also way way way up. >“Six months ago the narrative was that inflation was transitory,” says J.P. Morgan’s Lear. “That narrative has left the market. People no longer believe inflation is going to come down quickly.” Lies like this 'inflation is transitory' buys people time to exit their positions at low cost. It's literally criminal to allow market manipulation like this but I guarantee nobody will ever get punished. >It’s that the surge in inflation and economic growth came after the Fed had put in place exceptionally low interest rates to support the economy during the recession. The federal funds rate was at zero and the central bank had purchased more than $4 trillion worth of bonds, keeping market yields artificially low. Of which they haven't sold. https://tradingeconomics.com/united-states/central-bank-balance-sheet https://tradingeconomics.com/united-states/central-bank-bala... They bought bonds keeping it artificially low, but also bought them low. Which means that 'balance' isn't a balance. Those are all negative yielding. That $4 trillion in liabilities and $4 trillion in printed money which is already considered a liability. That is only part of the inflation. It's locked in, the fed can't sell these bonds, they'll hold onto those until maturity. Why do this? It prevent housing and car markets from melting down. The wealth of your country is at stake. Then again weird how GM, Ford, and Tesla are all profitable despite empty car lots and nobody buying cars because you're at home in lockdown. Like as if they saw all this coming eh?