muses of the moment

December 5, 2012

Mark J. Grant’s thoughts on the bond market

Groovygirl came across some interesting posts on zerohedge from Mark J. Grant, author of Out of the Box. He talks about the Fed’s “easing program” and the bond market.

Looks like this could go on for a while. Both posts very good reads…..

Click here.

Since we cannot invest off-planet or in some parallel universe the options that we have then are quite limited which is why, in my opinion, that the focus on Inflation or Deflation, historically always the epicenter of the discussion when major changes are made to monetary supply or fiscal policy, is not getting played out in the manner that most might suppose. I will go further, it is not Inflation or Deflation that are going to matter in the short run, though it will later; it will be the lack of bonds of any sort to purchase and a stock market that may be dangerously out of sync with the fundamentals opening the possibility of a crash and not a small one if it occurs. Institutional investors are edgy, that I can tell you with certainty, and it would not take much to see a flight from equities into bonds/commodities/gold regardless of the available yields and just because the money was relatively safe. Americans lost thirty-six percent of their wealth during 2008/2009 and while memories are short the pain of that experience has not yet been forgotten.

And here.

The demand for Treasuries will also push down absolute yields so that my springtime prediction of a 1.25% ten year Treasury yield, the actuality is 1.38% so far so I was close enough, will be breached in 2013 as the Fed takes in and monetizes somewhere between 80-100% of all new Treasury issuance.


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