So far 2021 has been a rather unsettling one for central bankers. There have been two main drivers of this. One is the rise and rise of Bitcoin which I note saw new highs over the weekend. But today’s subject is something that sends a deeper chill down their spine. Whilst we get a fair bit of talk from them about higher interest-rates in truth they give them sleepless nights.
Yields on 10-year Treasury notes have already reached 1.38%, breaking the psychological 1.30% level and bringing the rise for the year so far to a steep 43 basis points.
Analysts at BofA noted 30-year bonds had returned -9.4% in the year to date, the worst start since 2013. ( Reuters )
Just for clarity we are looking at the United States here and as they missed it out the thirty-year yield is now 2.16%. In terms of a comparison the ten-year began the year around 0.9% and the thirty-year 1.65%
The same rise of around 0.5% can have two different contexts. The historical one would be that it is not much but in my opinion that was then and this is now. So much of financial life is anchored around ZIRP ( Zero Interest-Rate Policy) and in some cases NIRP which suggests that more minor moves will have an economic impact. As an example of this let me bring you a consequence of all the easy monetary policy.