Sunday, March 15, 2015

A Trilogy of "Rising Interest Rate" Environments

The following chart shows the annual average of the 20-year treasury bond yield.

Click to enlarge.

Go ahead Yellen. Crank up those short-term interest rates this year and let's see what happens to long-term interest rates. Nearly every financial pundit in the USA seems to think up is the only direction. Don't let it concern you that we're currently well below 2014 levels.

And why might that be? Oil was ZIRP'd out behind the woodshed. Even 0% wasn't enough to save it. Let's see what some bonus rate hikes can do to other parts of our overleveraged economy! Go for it I say! The time for patience is over! The time to act is now! In the spirit of the housing bubble, raise rates now or forever be priced out!

What's the worst that could happen? This time I'm feeling lucky! You should too!

This is not investment advice. As a long-term holder of long-term bonds, I'm just sounding the clown horn. That's all. Don't read too much into it. I love that horn. It is the perfect theme sound of the long-term global economy.

If sarcastic and you know it honk the horn
If sarcastic and you know it honk the horn
If sarcastic and you know it
And you really want to show it
If sarcastic and you know it honk the horn

Source Data:
St. Louis Fed: Custom Chart


Michael said...

At some point the FED will have to put up or shut up.

Stagflationary Mark said...


If the Fed shuts up then how can long-term investors parse every single word in their statements looking for divine short-term wisdom?

Will the Fed remove the word patience? Over the long-term, who the #%^* cares?

I have never made a decision to buy and hold long-term inflation protected treasuries or I-bonds based on anything the Fed has said. I just don't see the wisdom in it.

Put another way, I don't have all that much faith in the opinions of detached and biased central bankers when it comes to the state of the economy. I'm not sure which is worse: being detached or being biased.

When they talk all I tend to hear is blah, blah, blah. I have the same reaction when listening to used car salesmen!

"This car had its oil changed every 1000 miles, never exceeded 50 mph, never drove up or down hills, there is no housing bubble to go bust, and the economy is strong and resilient! Buy this car now or forever be priced out!"

See what I mean? Hahaha! ;)

Anonymous said...

I think you need a yer on there.

If yer sarcastic and ya know it honk your horn...


dearieme said...

"As a long-term holder of long-term bonds ...": we are about to become short-term holders of short-term bonds - because foreseeable expenditures!

Stagflationary Mark said...


Ain't dat da truth! ;)

Stagflationary Mark said...


Speaking of foreseeable expenditures, I got good news and bad news today.

The good news is that I will be given a crown! Woohoo!

The bad news is that one of my teeth will be wearing it, lol. Sigh.