Gary Christenson | Jun 29, 2016 12:55AM ET
It has been reported that about $10 Trillion of sovereign debt “yields” negative interest. Assume total global sovereign debt is about $60 Trillion.
Therefore, about one-sixth of all sovereign debt has negative interest rates. This brings to mind a few questions.
Examine the following chart of the US 30-Year Treasury bond from about 1980. I have drawn blue cyclic vertical lines every 91 months that, with one exception, point to the highs.
The black arrows indicate a steep rise in T-Bond prices starting from lows several years before the cyclic highs. The current 2014 low to 2016 high looks similar to the 1984 low to1986 high.
Given that our short-term markets are currently managed by central banks, High-Frequency-Traders, and governments, I understand that markets, technical analysis, and cycles are distorted and manipulated, but the T-Bond highs have been regular and long-term. A cyclic high in T-Bonds is due in a few months. We’ll see….
What about negative interest rates? First, they seem crazy and unpredictable. Second, there were approximately no bonds trading at negative yields in early 2014, and now there are about $10 Trillion, which Bill Gross suggests will result in a destructive supernova.
Examine the following chart:
In round numbers the total of negative yielding sovereign debt is doubling every two – six months, and appears to be accelerating.
h2 Speculation:/h2Negative yielding debt has quadrupled from $2.5 Trillion to $10 Trillion in five to six months. Assume it quadruples again in five months, just in time for the US election when the total sovereign debt with negative yields would be approximately $40 Trillion. At that rate, in another couple of months all of the $60+ Trillion of global sovereign debt could have negative yield – another parabolic increase which probably will not happen.
h3 But we know from history that:/h3Gold and silver come to mind!
h3 Until then, ask yourself, “What could go wrong?”/h3Original post
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