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1.Market Observations, 8.Was Sticky

12 Jan 2018 (AFR) – Bond ice age thaw will send shockwaves through global markets

(12 January 2018, AFR, p29, by Ambrose Evans- Pritchard)

‘Each super-cycle for bonds over the past two centuries has lasted the span of a career. The tide is immensely powerful. When it turns, the world economic system faces what amounts to a regime change.’

The current “ice age” – to borrow from Albert Edwards at Societe Generale – began in 1981 when the US Federal Reserve delivered a crushing monetary shock and defeated the Great Inflation. Benchmark US yields have been falling in a staggered fashion ever since.’

‘It is the only experience that most investors, traders and PhD economists at central banks have ever known. But if the chartists are right – and you ignore them at your peril – the downtrend line has finally broken. US Treasury yields across the maturity spectrum are smashing through historic lines of resistance, with instant knock-on effects through the $US49 trillion ($62 trillion) market for global bonds. Louise Yamada, Wall Street’s celebrated technical analyst, says the two-year yield has been carving out a saucer-shaped bottom for almost a decade and is back to where it was in late 2008. It touched 1.99 per cent yesterday, up 74 basis points since September.’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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