{"id":5255,"date":"2015-02-04T06:33:05","date_gmt":"2015-02-04T11:33:05","guid":{"rendered":"http:\/\/olduvai.ca\/?p=5255"},"modified":"2015-02-04T06:33:05","modified_gmt":"2015-02-04T11:33:05","slug":"how-much-longer-can-central-banks-push-bonds-to-absurdity","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=5255","title":{"rendered":"How Much Longer Can Central Banks Push Bonds to Absurdity?"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2015\/02\/04\/how-long-can-central-banks-push-bonds-to-absurdity\/\" target=\"_blank\">How Much Longer Can Central Banks Push Bonds to Absurdity?<\/a><\/h3>\n<p>Central banks around the world have fallen all over each other lowering their benchmark interest rates. On Tuesday, the Reserve Bank of Australia was the latest, cutting its cash rate to an all-time low of 2.25%. It didn\u2019t mince words: \u201cA lower exchange rate is likely to be needed to achieve balanced growth in the economy.\u201d A rare admission of escalating the currency war. The Aussie dollar immediately swooned.<\/p>\n<p>Two weeks ago, the Bank of Canada suddenly cut its overnight interest rate by 25 basis points. Other central banks have chimed in. Japan\u2019s rate has been at zero for years. \u201cNegative deposit rates\u201d have infected a number of central banks, including the ECB.<\/p>\n<p>In this environment, the Fed is talking about\u00a0<em>raising<\/em>\u00a0rates from zero to next to zero, but the markets are not following its hints and are trying to force it to back off.<\/p>\n<p>Ten-year government bond yields in Japan and Germany dropped closer to zero, before bouncing off in a sharp rally to 0.39% and 0.31% respectively. This is called the \u201cJapanification of Germany.\u201d<\/p>\n<p>Back in August 2013, when 10-year JGBs still yielded around 0.8%, I wrote,\u00a0<a href=\"http:\/\/wolfstreet.com\/2013\/08\/10\/why-im-deeply-worried-about-japan-and-why-betting-on-the-collapse-of-jgbs-is-a-horrible-idea-2\/\">Why I\u2019m Deeply Worried About Japan \u2013 And Why Betting On The Collapse Of JGBs Is A Horrible Idea<\/a>, which has become a leitmotif. Japan\u2019s fiscal situation has deteriorated since, but JGBs have risen and yields have dropped, with shorter maturities sporting \u201cnegative\u201d yields. JGB shorts have been kneecapped. Inflation is 2.4% as measured by the all-items index, and 3.1% for goods. Financial repression has become the rule.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How Much Longer Can Central Banks Push Bonds to Absurdity? Central banks around the world have fallen all over each other lowering their benchmark interest rates. On Tuesday, the Reserve Bank of Australia was the latest, cutting its cash rate to an all-time low of 2.25%. It didn\u2019t mince words: \u201cA lower exchange rate is [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[942,3186,88,124,233,282,431,452,3086],"class_list":["post-5255","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-bond-yields","tag-bonds","tag-central-banks","tag-ecb","tag-european-central-bank","tag-interest-rates","tag-japan","tag-reserve-bank-of-australia"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5255"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5255\/revisions"}],"predecessor-version":[{"id":5256,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5255\/revisions\/5256"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}