Bond Massacre, Inflation Prick Biggest Bond Bubble in History | Wolf Street

Negative yielding bonds are complete insanity. But that’s how far central banks went to whip the greatest bond bubble ever into frenzy through interest rate repression and money printing. Money printing means that central banks are buying bonds with newly created money, and this drove up bond prices and pushed down yields below zero percent in those countries

Among the developed economies, the United States CPI inflation is on top. You have to go to Brazil or Russia to get more inflation. In Russia, the central bank policy rate is now over 20%, and Brazil’s policy rate is nearly 12%. But in the US, the policy rate, the upper limit of the range, is just 0.5%.

What this means is rising yields and rising interest rates going forward, and lower bond prices, and lower home prices, and lower stock prices. A lot of assets will be repriced in this new era of much higher interest rates.

If the Fed doesn’t have the fortitude to do this, inflation will bloom and blossom, and the dollar’s role as dominant global reserve currency – which has been shrinking for years – will shrink a lot further, a lot faster. And the dollar’s role as dominant global investment currency will fizzle. And the dollars role as trading currency will take a serious perhaps irreparable hit. All kinds of issues will pop up that could jostle the US economy in seriously unpleasant ways.

Bond Massacre, Inflation Prick Biggest Bond Bubble in History | Wolf Street