Monday, Jun 18, 2007
End of Cheap money
moneyweek: Why you should be worrying about bond yields
Why does this matter? Well,“It may seem esoteric to you, but the yield on government bonds is the foundation on which all asset values rest.”Basically, if you can get a yield of say 5.5% by putting your money into a UK or US government bond then anything riskier (which is just about anything) needs to offer a better return than that.So yields on everything from commercial property to emerging market debt need to rise. And for yields to rise, prices have to fall.“I suspect the era of very low real rates is coming to an end we may be about to enter a period of high real rate this would have profound consequences for asset valuations everywhere. Bootle’s far from being the only worried voice.“the writing is on the wall” and that the era of low interest rates and cheap money is finally
2 Comments
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1. Planning4acrash said...
Beautifully described CS.
2. sold 2 rent 1 said...
This bond crisis is the precursor to the stocks crash this autumn and ultimately HPC
I see the GBP/Yen is at 245.
I originally thought the bond/gilt market might be a safe haven for my ISAs before piling into gold at the end of the year
I think Japanese stocks may perform better in the coming crash. Any fall in Japanese stocks should be offset by the rise in the Yen.