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Negative Interest Rates Are Here

by John Rubino on October 19, 2015 · 12 comments

Not so long ago, a bank was by definition a business that took deposits from customers, paid them for the use of their money, and lent the cash to other customers at a profit. But that’s not how it works anymore: Big banks to big American companies: We don’t want your cash (MarketWatch) – State […]

History teaches that long trends end only when everyone is finally convinced that they’ll keep going. Maybe no trend in modern times has been as convincing as interest rates. The yield on long-term Treasury bonds, for instance, has been falling for as long as most people have been alive: Same thing for the rest of […]

Interest Rates Spiking Everywhere

by John Rubino on May 18, 2015 · 6 comments

Just as ultra-low interest rates start to seem normal, the markets decide otherwise. US 10-year Treasury bonds yielded about 1.9% in April and are now above 2.20%: And the trend reversal isn’t limited to the US. Across Europe and Asia rates have spiked in the past month. From Bloomberg: What does this mean? Several things, […]

Lowest Interest Rates EVER

by John Rubino on February 24, 2015 · 4 comments

Business Insider’s Myles Udland just posted a chart, drawn from research by the Bank of England, showing interest rates for the past 3,000 years. And for all those who’ve been feeling like today’s “new normal” is actually profoundly abnormal, here’s your proof. It turns out that interest rates, both long and short-term, are lower than […]

Real Interest Rates and Future Chaos

by John Rubino on September 7, 2014 · 8 comments

The folks at Gresham’s Law just published a nifty interactive chart of real (i.e., inflation-adjusted) interest rates since the 1960s that explains a lot about today’s world. To make sense of this, let’s start with a a little background: Interest rates are the rental cost of money, but to figure out the true cost you […]

It’s easy to assert that big banks and other holders of long-term bonds will be crushed by rising interest rates, but it’s tough to calculate just how bad the carnage will be and how quickly it will come. Tough but not impossible. A couple of recent Zero Hedge articles provide some data – and it’s brutal. […]

Mortgage REITs are companies that borrow money to buy mortgage backed securities (MBS) and earn the spread between their cost of funds and the yield on their MBS. When interest rates are going down and MBS are performing well these guys make fortunes. But when interest rates go up and bond prices fall, their excessive […]

Interest rates soared again last week. This weekend a lot of people are running a lot of numbers and getting some terrifying results. It seems that the past few years of falling interest rates have lulled a big part of the global economy into financing with variable-rate debt. So when interest rates go up, there’s […]

Interest Rates Spike Again

by John Rubino on July 5, 2013 · 25 comments

This morning’s employment report looked good enough on the surface to rekindle talk of an end to the Fed’s debt monetization program. So in addition to buying stocks at the open, traders began their day by dumping bonds. The 10-year Treasury yield is up by another 21 basis points in early trading, to almost 2.7%. […]

The Number That Matters

by John Rubino on June 10, 2013 · 3 comments

Friday was one of those days when so many markets move so dramatically that it’s hard to know what to focus on. But in this case the headline numbers – US stocks way up, gold way down, foreign markets all over the place — matter less than the interest rate on 10-year Treasuries, which spiked: […]

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