Will Bond Yields Continue To Rise?

The recent surge in interest rates is largely credited to rising expectations of inflation but it might also signal other problems.

The Fed has committed to ongoing purchases of government debt and we believe that the Fed is prepared to eventually escalate its purchases of Treasuries to constrain interest rate increases it deems undesirable.

The projected 2021 issuance of almost $2 trillion of Treasury debt (likely a low estimate) will be difficult to sell, even with the Fed’s intervention, without pushing yields significantly higher.

A decline by equity markets would serve to drive capital into Treasuries which would lower yields, as would a change in the consensus view of inflationary fears. Without one or both events, much higher Treasury yields seem assured.

We discuss the key factors affecting interest rate prospects in our recently published March issue as well as our usual updates on major global markets and investment positions.

If you found this post of interest, you’ll find the Global Investment Letter of value. To view free sample issues and to receive our weekly investment comment please visit: https://www.globalinvestmentletter.com/sample-issue/