Wednesday, July 24, 2013

The Great Bond Market "Panic" of 2013

Click to enlarge.

Gasp in horror at the return to the long-term declining trend lines. Behold the exponential trend failures which have been foretold for years! Any second now! Brace for them!

So when will the Fed raise rates? Let's listen to the experts!

December 23, 2010
Economists: Fed won't raise rates until 2012

Only seven out of 25 participants are forecasting a rate hike in the next twelve months, and most of those expect it to come in the final three months of 2011. Another nine expect the next rate increase to come in the first quarter of 2012, while eight more are expecting a hike later that year.

The current bid is 2012. Can I hear 2013? Yes!

January 12, 2012
Economists Expect Fed to Raise Rates by 2014

Broadly speaking, the consensus is that the Fed will do nothing on interest rates in 2012. A few economists see it moving aggressively in 2013, but the majority don’t. By 2014, though, the consensus sees an end to the long-period of ultra low interest rates engineered by the Fed in response to the financial crisis and slow recovery.

Can I hear a "well before 2014"? Yes, you sir in your ivory tower!

March 26, 2012
Fed to Raise Rates `Well Before 2014' Siegel Says

Can I get a 2015? Yes, you sir! 2016? Yes! Yes!

April 30, 2013
Fed Officials Forecast Main Rate to Stay Near Zero Until 2015

Few expect the central bank to start raising short-term rates before late 2015 or early 2016...

This is a very popular item guaranteed to impress the ladies. Can I get a "Years in the Future" bid? Yes!

July 10, 2013
Wharton School's Jeremy Siegel Thinks the Fed Raising Rates Is Years in the Future

Seigel thinks that a 3% yield on the 10-year Treasury would take a bite out of the stock market.

Sold to the desperate man in the ivory tower! Nicely played Professor Siegel! We'll just forget about your previous "well before 2014" bid. That was just crazy talk.

Source Data:
St. Louis Fed: Custom Chart
Bloomberg: US Rates


Stagflationary Mark said...

I don't feel comfortable applying the "exponential trend failure" label to this post based on the "common knowledge" that it will soon be true. As seen in the chart, there is not even a hint of a long-term trend failure yet. Both data points are sitting pretty much right on their long-term trends!

I think I shall instead wallow in my sarcasm on the sidelines and await confirmation.


Who Struck John said...

Some things are trends ... others are step functions. Market sentiment is a step function. Uncle Ben made the herd nervous for a moment but calmed them back down.

A real break has to wait upon events; the Fed is trapped in perpetual ZIRP.

Stagflationary Mark said...

Who Struck John,

A real break has to wait upon events; the Fed is trapped in perpetual ZIRP.

SNL: Bug Off ;)

dearieme said...

I'm torn. If rates are going to stay low for a generation - a la Japan - then I'll invest in an opportunity that interests me: short term it's fixed-interest but long term it benefits from inflation-linking. But if rates are about to jump up then I'll wait. Hm. I need to decide by end October.

Stagflationary Mark said...


Buy one bond at the regular interest rate and get a Detroit General Obligation Bond absolutely free! ;)

Who Struck John said...

Mark ... Detroit is a horrible warning that things that are worth zero are in no way cost-free.

Stagflationary Mark said...

Who Struck John,

Buy one abandoned home at the regular price and get a second one absolutely free*!

* Just pay separate property taxes and handling. Limit 5 free households per household.