Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Long Term Interest Rates Are On The Up…What’s Next?

Interest-Rates / US Interest Rates Jun 23, 2015 - 04:12 PM GMT

By: Harry_Dent

Interest-Rates The Fed has delayed a rate hike yet again. It seems convinced the economy isn’t ready to survive on higher short-term rates. So we continue to see zero rates to stimulate more economic activity. But today the market is proving just how limited the Fed’s influence really is!

I’ve been warning for years now that there is a limit to how much you can stimulate the economy with free money and zero interest rate policies before the financial drugs no longer work. Eventually, the system breaks down from excessive debt and overexpansion.


There are two signs that this is finally happening. No. 1 is the beginning of debt defaults again, starting with Greece. No. 2 is that, despite continued zero short-term rate policies and endless QE around the world… long-term interest rates are finally rising.

These policies will fail. When it happens, it will result in debt deleveraging and deflation as we have written about extensively.

We saw this start to occur in late 2008… which is precisely why governments around the world stepped in with unprecedented zero interest rate and endless QE policies. They believed they could simply print enough money to offset the economic decline and debt deleveraging — using inflation to fight deflation.

We’ve seen 10-year Treasury yields go up from late January’s low of 1.65% to 2.47% last Wednesday. And they look likely to continue to rise, just as I’ve forecasted. This is not good for stock market valuations or real estate or the economy or the “frackers” that are due to bust ahead from falling oil prices. I believe we could see U.S. 10-year rates rise to as high as 3.3% or a bit higher in the months ahead.

But this rise in rates is worldwide… and it accelerated recently in Europe.

The greatest impact of the impending Greek debt default is not the “Grexit” threat hanging over the euro zone. It is that long-term sovereign interest rates have been rising across the board since April because of it.

Greek 10-year rates were first to rise and have jumped from 5.57% to 13.04% in the last several months. They reached 37.1% in 2012 when the last euro crisis hit… so how high will they go next time?

German bond yields went to an astoundingly low yield of 0.08% and have recently bounced to as high as 0.99%. Other bonds in the euro zone went up similarly as did Japanese bond yields. That’s a big move in a short period of time for Europe’s “healthiest” economy. And it very likely marks an important turning point in rates.

The way Greece’s potential debt defaults are spilling over to Portugal, Spain and Italy is the first cause of rising rates, and these defaults back-up on leading countries like Germany. As risk-free sovereign rates rise, corporate — and especially high yield or junk bond rates — rise more.

The second driver may be what I call “late-stage inflation.”

Inflation has almost always risen into the early stages of a recession — and we are either already in a recession or very close to it, as I discussed in the June Boom & Bust issue. Inflation pressures will likely rise a bit more as job growth remains strong (which I explained Tuesday won’t last forever). It’s a paradox. But that’s how we continue to get rising long-term interest rates at first, despite a slowing economy.

Besides all that, I know long-term rates are very likely to continue rising due to one of my best long-term indicators: the Treasury Bond Channel. When we get to the bottom of this channel, rates tend to rise. When they hit the top, they bounce back down. See for yourself...

The last bottom occurred in mid-2012 when 10-year Treasury rates hit 1.39%. The first rise was to 3.04% leading up into late 2013, then back down to 1.65% late this January. Then, as high as 2.47% last week.

I have been predicting they will rise to 3.3% to 3.4% by late 2015 or so. That will be another trigger for a deeper economic crisis and stock crash ahead. Such a move would simply be about the same spike I just mentioned between mid-2012 and late 2013. That would translate currently to a move from 1.65% to around 3.3%.

So this is not a wild forecast. It’s actually a very likely one.

If we do see such a rise it will be the time to load up on 30-year Treasury bonds to get the greatest yields (4%-plus) and capital gains from the deflationary crisis to follow.

That crisis could bring 10-year yields down towards 0% — the lowest in history. This won’t be as much from potential new and accelerated QE policies like we saw from 2008 through 2014. If QE happens again, it will be less potent. Voters may even resist it after the last QE policy failed so miserably. Rather, it will be more from negative average inflation rates of 2%-plus for the next several years.

So avoid the 10-year. We recommend 30-year Treasuries because they’ll have almost 1% higher yields than the 10-year and greater appreciation when deflation finally sets in and interest rates fall even further.

This play will be especially good for investors nearing or in retirement looking for solid yields and income. Forget buying high dividend stocks with 2% yields! They’ll get crucified in the years ahead and your dividends — if they don’t get cut — will look like nothing compared to your investment losses.

Just remember: Long term Treasury and high quality corporate bonds roughly doubled including interest in the 1930s. They were the only major asset class to go up in the last deflationary and winter season. It will happen again.

Be on alert for higher yields on the 30-year Treasury!

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules