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Alasdair Macleod: Sovereign bonds won't stay up forever
By Alasdair Macleod
Research Director, GoldMoney
Friday, February 6, 2015
Today's obvious mispricing of sovereign bonds is a bonanza for spending politicians and allows over-leveraged banks to build up their capital. This mispricing has gone so far that negative interest rates have become common: In Denmark, where the central bank persists in holding the krona peg to a weakening euro, it is reported that even some mortgage rates have gone negative, and high quality corporate bonds such as a recent Nestle euro bond issue are also flirting with negative yields. ...
Macroeconomists will probably claim that so long as central banks can continue to manage the quantity of money sloshing about in financial markets, they can keep bond prices up. But this is valid only so long as markets believe this to be true. Put another way, central banks have to continue fooling all of the people all of the time, which as we all know is impossible.
... For the full commentary:
http://www.goldmoney.com/research/analysis/sovereign-bonds?gmrefcode=gata
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