Greg Mankiw tackles the meme of whether bond yields are low today. His answer: there is no indication that this is true.
I am always surprised when people claim that they know that interest rates are low and are going to rise. In effect they are saying that the investors in an incredibly efficient, liquid, multi-trillion dollar market are overpricing bonds.
An interesting side note of Greg's post was a link to a really great site that posts correlations between major asset groups. I'll be showing this in class.
The short end of the yield curve is priced at nearly zero yield. So, it is safe to predict short rates will "eventually" rise. However, the long end, as always, is pure guesswork.
ReplyDeleteAgreed on the short rates - good point.
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