Ongerustheid in de obligatiemarkt
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Ongerustheid in de obligatiemarkt
https://www.ft.com/content/a07d5a72-269 ... f5136f737e
“It’s a classic supply-and-demand mismatch problem, but on a global scale,” says Amanda Stitt, a fixed-income specialist at $1.6tn asset manager T Rowe Price. “The era of cheap, long-term funding is over, and now governments are jostling in a crowded room of sellers.”
Citadel founder Ken Griffin said it was “just fiscally irresponsible” to run deficits of 6 or 7 per cent of GDP while there was full employment.
“The bond market has never been more powerful, because we’ve never had so much debt,” says Ed Yardeni, the economist who coined the term “bond vigilantes” in the 1980s to describe investors whose activities drove governments to strengthen public finances.
Central banks in most big economies are still on a path of cutting interest rates, which has kept short-term rates relatively well tethered. But they have less influence over longer-term borrowing costs. There, investors’ expectations for inflation — which can eviscerate the fixed returns offered by bonds — and concerns over excess supply are also critical. Measures of the so-called term premium, a theoretical measure of the part of the long-term interest rate that compensates investors for this uncertainty, are rising.
The yield gap between two-year and 30-year US Treasuries has reached about a percentage point, its highest in three years, with similar steepening elsewhere.
Government bond prices also act as a benchmark for corporate borrowing costs, so a deeper problem at the long end of the curve will spill into companies’ borrowing costs too.
Veteran investor Ray Dalio has warned of a “death spiral” where borrowing costs are forced higher in a self-fulfilling cycle.
But most investors think the US can escape this trap, partly through pressure from the bond market. “Hemingway described the path to insolvency as ‘gradually, then suddenly’,” wrote Standard Chartered’s Steve Englander in a recent note. “The US, in our view, is likely to stay on the ‘gradually’ part for an extended period, quite possibly forever.”
Another option is that countries erode the real-terms value of their debt by tolerating a higher level of inflation than they would have had otherwise. “Effective default through inflation risk could become a material risk,” warns Englander. The danger is that government spending and the need to maintain orderly debt markets become a dominant force for monetary policy, rather than other factors such as economic growth or inflation. “What I’m really concerned about is that you end up in the fiscal dominance story,” says Bill Campbell, a fund manager at DoubleLine Capital, where increased government borrowing and spending “crowds out” private investment. That, he warns, could lead to a “permanently lower growth trajectory . . . [a] long-term malaise of lower growth, and a massive debt overhang”.
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“It’s a classic supply-and-demand mismatch problem, but on a global scale,” says Amanda Stitt, a fixed-income specialist at $1.6tn asset manager T Rowe Price. “The era of cheap, long-term funding is over, and now governments are jostling in a crowded room of sellers.”
Citadel founder Ken Griffin said it was “just fiscally irresponsible” to run deficits of 6 or 7 per cent of GDP while there was full employment.
“The bond market has never been more powerful, because we’ve never had so much debt,” says Ed Yardeni, the economist who coined the term “bond vigilantes” in the 1980s to describe investors whose activities drove governments to strengthen public finances.
Central banks in most big economies are still on a path of cutting interest rates, which has kept short-term rates relatively well tethered. But they have less influence over longer-term borrowing costs. There, investors’ expectations for inflation — which can eviscerate the fixed returns offered by bonds — and concerns over excess supply are also critical. Measures of the so-called term premium, a theoretical measure of the part of the long-term interest rate that compensates investors for this uncertainty, are rising.
The yield gap between two-year and 30-year US Treasuries has reached about a percentage point, its highest in three years, with similar steepening elsewhere.
Government bond prices also act as a benchmark for corporate borrowing costs, so a deeper problem at the long end of the curve will spill into companies’ borrowing costs too.
Veteran investor Ray Dalio has warned of a “death spiral” where borrowing costs are forced higher in a self-fulfilling cycle.
But most investors think the US can escape this trap, partly through pressure from the bond market. “Hemingway described the path to insolvency as ‘gradually, then suddenly’,” wrote Standard Chartered’s Steve Englander in a recent note. “The US, in our view, is likely to stay on the ‘gradually’ part for an extended period, quite possibly forever.”
Another option is that countries erode the real-terms value of their debt by tolerating a higher level of inflation than they would have had otherwise. “Effective default through inflation risk could become a material risk,” warns Englander. The danger is that government spending and the need to maintain orderly debt markets become a dominant force for monetary policy, rather than other factors such as economic growth or inflation. “What I’m really concerned about is that you end up in the fiscal dominance story,” says Bill Campbell, a fund manager at DoubleLine Capital, where increased government borrowing and spending “crowds out” private investment. That, he warns, could lead to a “permanently lower growth trajectory . . . [a] long-term malaise of lower growth, and a massive debt overhang”.
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