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Category: Inflation

Interest rates are on the rise, at their highest levels in over 4 years. What is that telling us, if anything, about growth and inflation? Let’s take a look… While you often hear commentators suggesting there is a strong relationship between bond yields and the real economy, the evidence seems to be lacking. Since 1930, […]

  • Posted in Bonds, Economy, Inflation
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We often hear that Gold prices are driven by real interest rates. Rising real interest rates are said to be bad for Gold because it increases the opportunity cost of holding the yellow metal. This makes sense intuitively as Gold pays no interest or dividend, and will therefore be less attractive as compared to risk-free […]

At 2.9%, the 10-Year Treasury yield is near its highest level in the past 4 years. At the current rate of inflation (2.2% CPI in the past year), this translates into a real yield of 0.7% (real yield = nominal yield minus inflation). Is such a real yield good or bad value for Treasury bond […]

  • Posted in Bonds, Inflation
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Is Cash No Longer Trash?

Short-term bond yields (1-month through 3-years) are hitting their highest levels in over 9 years. Why? The market (Fed Funds Futures) is expecting the Federal Reserve to hike rates 3 more times in 2018: a 25 basis point move in March, a 25 basis point move in June, and a 25 basis point move in […]

Inflation. Deflation. Two words often heard in conversations about the bond market. Why? Because bond investors tend to demand higher yields in periods of higher inflation and lower yields in periods of lower inflation or deflation. Looking at a long-term chart of yields and inflation, the relationship is clear. Data Source: Federal Reserve Economic Data […]