Since the election of President Trump on November 8th, interest rates have lurched higher. With the benchmark US 10 year treasury having risen about 40 basis points, the question ‘has the 35 year bull market in bonds finally reached its nadir’ is more relevant than ever. Since discussing the subject in mid January (here) here at The Sounding Line, rates have moved sideways, keeping open the possibility of a breakthrough or breakdown. Given the timeliness of this question, who better than James Grant of Grant’s Interest Rate Observer to shed some light on the subject.
Interest rate historian and market observer James Grant holds the conviction that the 35 year bull market in bonds is over. Pointing to the “proposition that you are investing at this point with almost a guaranteed loss” and noting “the utter absence of value, at the peak of the lunacy in 2016 upwards of $14 trillion of sovereign debt, principally European, was priced to deliver a yield of less than nothing, a nominal yield of less than nothing, Now in the long history of markets you are hard pressed to find that particular value proposition… never once in 5000 years of recorded annuls of interest rates has this occurred.”
However, recalling the ten years it took yields rise from the low in 1946, Grant warns that interests rates could take many years before rising powerfully, but warns “don’t assume anything.”
The interview is 26 minutes also covers Grant’s expectations for Trump’s fiscal policy and his outlook for the Fed.
Enjoy the interview below: