Taps Coogan – March 12th, 2021

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Grant’s Interest Rate Observer founder and editor, Jim Grant, recently spoke with CNBC to proclaim that the 40 year bond bull market is ending and that the Fed has corrupted “the most important price in capitalism.”

 

Some excerpts from Jim Grant:

“My view, if you take a very wide angle lens, is that we have been in a 40 year bull market in bonds. Almost no one living on Wall Street has any recollection of interest rates rising. We are predisposed to assume that rates go down. That seems natural. These are the lowest nominal rates in 4,000 years. To take a slightly narrower lens, (rates) are remarkably low when adjusted for inflation. As measured since 1962, you would get as a saver about 2.5% real, as in inflation adjusted, yield on a 10-year treasury. Today you get exactly no real interest… The value proposition for the 10-year treasury, to me, is absolutely barren…”

“How often do we hear that the 10-year treasury is the most important rate in capitalism? …It is an artificial rate, a manipulated rate. So, the most important price in capitalism is corrupted…”

“I think the treasury rate is going to go up. It ought to go up to generate a proper return for savers. More important than what I think ought to happen is what will happen owing to the imbalance of supply and demand… Nobody buys (treasuries) because he or she thinks its a great deal. This is a security that’s held by people that are price insensitive and it certain shows…”

“I think that the 40-year bond bull market is arguably over or ending and what lies ahead of us is important inflation with rising interest rates.”

There is more to the interview, so enjoy it above. 

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