Monday, July 11, 2016
What Is The Bond Marketi Telling Us?
Interest rates in the US are at a 227 year low. There are negative interest rates in parts of Europe. What is that telling us? Ordinarily, interest rates are sensitive to a worry about price inflation. We get price inflation when the demand for products and services is greater than the supply. The bond market is telling us that investors are not worried about price inflation. The implication is that we should not expect excessive demand to drive up prices. In other words, investors are not worried about rapid economic growth. There are other factors that affect interest rates and some of those considerations are discussed in this article. Its fairly clear, however, that the bond market is not signalling concerns about excessive demand