atans1

Low bond yields not good for equity returns

In Financial competency on 06/02/2015 at 12:19 pm

http://www.economist.com/blogs/graphicdetail/2013/08/daily-chart-8

Low bond yields have in the past been bad, not good, for equity returns.

  1. Must see what type of bonds — IG govt or junk??

    In traditional parlance, IG govt bonds low yield –> signs of economic slowdown –> people scared –> seek safety.

    Junk bonds low yield –> hot economy –> people willing to buy any ah kow ah mao bond as long just 1% above govt bonds.

    But today is different. Mass manipulation by QE and central banks. Govts print trillions of bonds and their central banks buy them up. ZIRP monetary policies also further depresses yields, especially short-term over which govts have greater control. People starved for yield with 0.001% savings deposits go buy up shit bonds.

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