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发帖数: 2767 | 1 【 以下文字转载自 HardTimeCall 俱乐部 】
发信人: XXLBass (大巴司机), 信区: HardTimeCall
标 题: What Happens When Bond Yields Are Lower Than the Inflation Rate?
发信站: BBS 未名空间站 (Sun Jul 8 23:30:01 2012, 美东)
By James Debevec Jul 06, 2012 11:45 am
Bond yields predict disinflation.
MINYANVILLE ORIGINAL Not long ago bond yields were lower than the inflation
rate. There were a number of articles commenting on the phenomenon. A common
piece of advice in many of these articles was to invest in commodities. The
basic logic was that low interest rates would cause inflation and “real
assets” would benefit. Let’s take a look at what has actually happened
when long term bonds offer negative real returns.
Since the inflation rate is a “monthly” data point, we will look at
monthly data. The 30-year bond was reinstituted in February 1977 so the data
starts there. Here are the months since then when the 30-year yield was
trading below the rolling 12-month inflation rate as of the last day of the
month:
Oct 1978 to Dec 1980
Sep 2005
Jun 2008 to Sep 2008
Aug 2011 to Dec 2011
For those of you who are curious, the average premium for the 30-year bond
yield over the inflation rate is 3.31%. If bonds would trade with the same
premium at the current 1.70% rate of inflation, the 30-year bond yield would
trade at 5.01%. This is 81% higher with June’s closing yield of 2.76%.
What was the premium low in each cycle?
June 1980 -4.39%
Sep 2005 -0.12%
July 2008 -1.00%
Sep 2011 -0.97%
What was the premium high in the cycle?
May 1984 9.61%
Oct 2006 3.41%
July 2009 6.41%
May 2012 0.97% (so far)
Besides the current situation, all the premium increase moves lasted at
least a year and each premium cycle peak went above the long-term average of
3.31%.
So what happens next? Investors need to protect themselves against the
ravages of inflation. So, theoretically at least, either bond yields should
go up or inflation should go down. Which is it? Let’s take a look at bond
yields and inflation from the premium cycle low to the premium cycle high.
The most recent month in this article was May 2012 since we don’t have CPI
data for June yet. It is extremely unlikely that the May 2012 premium of 0.
97% will end up being the all-time peak in the cycle but we can get a sneak
peak on how events are unfolding thus far.
June 1980 to May 1984 Yields went up 28.7%. The inflation rate went down
70.6%.
Sep 2005 to Oct 2006 Yields went up 8.5%. The inflation rate went down
55%.
July 2008 to July 2009 Yields went down 6.3%. The inflation rate went
down 137%.
Sep 2011 to May 2012 Yields went down 7.9%. The inflation rate went
down 56%.
Bonds had mixed results. On (compounded) average bond yields went up by 4.7%
from the premium low to the premium high (which varied greatly with respect
to time). So this indicator, in isolation, is moderately bearish for
bondholders. But in every instance the inflation rate decreased by at least
55%.
What about stocks and commodities?
Dates Stocks Commodities
June 1980 to May 1984 31% -3.9%
Sep 2005 to Oct 2006 12% 15.4%
July 2008 to July 2009 -22% -24.9%
Sep 2011 to May 2012 15.8% -9.2%
Stocks went up a compounded average of 7.2%. Commodities went down a
compounded average of 6.7%.
Of the three major asset classes, only stocks fared pretty well. Stocks had
one outlier (in 2008), but it was a doozy. However, commodities did even
worse during that time period. There was only one instance when commodities
did better than stocks and that was only by 3.4%. This fits well with
previous articles which suggest one should be bullish on stocks but neutral
on commodities.
So when you see negative bond yields you definitely want to take your
chances with stocks over commodities. But the best predictive value of all
with respect to negative bond yields is not financial but economic. Every
time there have been negative bond yields, the inflation rate has declined
by at least 55%. Negative real bond yields did not cause inflation, but
rather predicted disinflation.
Read more: http://www.minyanville.com/trading-and-investing/fixed-income/articles/inflation-disinflation-bonds-treasuries-bond-market/7/6/2012/id/42222#ixzz205nWJB8C |
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