All of the sudden boring old government bonds have become real interesting. For over the last six weeks a remarkable new awareness has come over the credit market…
If you can believe it, interest rates don’t always go down. In fact, sometimes they go up.
“In the last six weeks, benchmark 10-year U.S. Treasury note yields have surged to 2.19 percent, from 1.60 percent at the beginning of May,” reports Reuters.
“As a result the market has seen a sharp outflow from bond funds and notable lack of demand in Treasury bond auctions. The fund outflows and the rise in volatility offer a worrying glimpse of how markets are likely to behave as the Fed works to scale back its enormous monetary stimulus of the U.S. economy.”
Our guess is that as the Fed tapers and turns interest rates will rise – a lot!
Hitting a New Inflection Point
No doubt, the realization that interest rates also go up should have been obvious. But, for people under age 50, it’s something they’ve never experienced their entire adult lives – or more. Because the experience of the last 30 years shows that rates generally always go down.
You have to go back further than that to find any evidence to the contrary. Those making their way between 1945 and 1982 had an entirely different perspective. Their experience taught them that interest rates rarely go down, and that they most always go up.
Interest rate cycles generally last between 25 and 35 years. Ten Year Treasury yields peaked in 1920. Then they slowly slid down a soft slope until the mid-1940s. After that they ran up until 1982. But in early 1982 interest rates again ventured over the mountain and slid down another soft slope to below 2 percent.
Finally, it appears we’ve hit a new inflection point.
But that’s enough chronicling the great economic smashup for today. Instead, for fun and for free, we’ll recount certain events from father’s day. What follows occurred on father’s day 2009. We’ve merely updated it here. Enjoy…
Ingesting Rabbit for Supper
One of the many things we didn’t appreciate until we became a father was just how exhausting and expensive it is. No days off…no markdowns – not even on father’s day. We’re not complaining. In fact, we wouldn’t have it any other way. We just have a deeper appreciation for it all than before.
For example, last Sunday morning, after opening our father’s day card and trying on a new pair of shoes, our wife informed us the in-laws – and several outlaws – were coming over for a barbeque. That meant we had plenty of chores to do…and quick.
We edged the yards, cut the grass, cleaned the grill, hosed off the outdoor kids toys, tested the spa water, emptied the trash, and more. Then, after pausing a moment to drink some water, it was off to the market, where we emptied our wallet to buy steaks and all the fixings…well almost all, that is. For cousin Caesar brought a rabbit soaked in a cactus and chili marinade.
“It’s good,” promised Caesar, grinning through a gaping hole in his front teeth which we presume was knocked out in a Mexico City scuffle back in his native country.
Yet by the pungent stench we’d wafted on the neighborhood for nearly 40 minutes while roasting the thing on the grill, we were certain it wouldn’t be good. Still, as we bit into it, we hoped somehow it would taste like chicken. Alas…it didn’t.
We choked down a bite or two and then, when no one was looking, promptly discarded our plate in the trash.
“Next time we’ll bring crocodile,” said Caesar with a wink.
We hope he was kidding. We imagine our neighbors do too.
Sincerely,
MN Gordon
for Economic Prism
