Last week we explored a topsy turvy world that quantitative easing (QE) could cause, with the lowest bond yields potentially occurring in the highest inflation economies. We noted that this would be the death of the bond vigilantes, as they are overwhelmed in their attempts to force higher bond yields by the ammunition of the printing press being put to work in government debt.
This begs the qu… Read the article
Traditionally the main concern for a bond investor is inflation. It reduces the real returns of a bond, hence prompting higher long term interest rates, and causes the authorities to increase short term interest rates as a policy response. The increases in rates cause the current value of bonds to fall. Inflation is bad for bonds, full stop.
Quantitative easing is now threatening to turn that … Read the article
Today we have seen the preliminary release of M4 money supply (so-called ‘ broad money’), and it could potentially be a very important piece of economic data. December saw a 1.1% drop in the money supply, the largest monthly fall since records began in 1982. Expectations were for a 1% increase. Year-on-year, expectations were for an 8.9% increase, but this came in at a meagre 6.4%. M4 money sup… Read the article