I rates are low and so they will remain. Otherwise it would not be explained how Austria has just issued a 100-year bond at a rate of less than 1%, and investor demand was a large multiple of the quantities offered. Who knows, perhaps the 100-year maturity will become the “new 30 years”. And perhaps we will go even further, with i perpetual bonds. There are, as you know, many precedents. And, as we don't know, Timothy Young, the curator of the Beinecke Rare Book & Manuscript Library at Yale University, has just received 136,20 euros as interest on an irredeemable bond, kept in the library and issued in 1648 by the Hoogheemraadschap Lekdijk Bovendams, a water company made up of landowners and local dignitaries that managed locks, canals and a twenty-mile stretch of the lower Rhine.
Coming to our days, so would the Governments issue irredeemable bonds for those investors (primarily, directly or indirectly, the Central Banks) who intend to hold them until maturity (which there are no securities here) and are therefore not required to mark-to-marketwhich would be embarrassing for their balance sheets if rates rise again. So much, you know – Japan teaches – that the public bonds of which the Central Banks make indigestion they will never be refunded by governments (apart from the rite of renewal at maturity, which perpetual bonds would do without).
I long rates, which showed timid signs of an increase last month, are I went down again following the recrudescence of infections and the inevitable consequences on closures and damages to the economy. The yield of the btp came down. The fibrillations of Italian politics and the absurd debate on the use of the ESM loan (those who oppose it should explain why they also refuse a few billion euros of interest savings) must not hide the fact that the safety net arranged around the financing of Italian public bond issues works and will work.
The yields of T Bonds, around 0,6% on the 10-year bond, are at historic lows, and those of Waist – negative around -0,5% – are close to the lows of the beginning of the year. Despite the fall in inflation, which would otherwise have weighed down i real returns, the latter are also going down. The old rule according to which the real interest rate should be close to the growth rate of the economy is destined to remain disregarded in this epochal crisis, where (de)growth rates are, for many countries, slightly above or slightly below -10 percent.
Il dollar it weakened against all major currencies, partly for geopolitical reasons – the United States is not giving a great image of itself, both because of Trump's tantrums and because of the surges of the virus – and because the growth prospects are "less worse" in Europe compared to America.
The performance of the dollar is especially relevant against the yuan, which has strengthened to 7 and could even go towards the "six point". There Shanghai Stock Exchange, which has soared (like the US Nasdaq, it is well above its pre-pandemic level) is attracting capital (fingers crossed). And the growth differential between China and America it is very high.
Le Bags they shrugged at the return of the virus, and seem to trust more on the low cost of money, which magnifies those discounted-to-today future profits that are the theoretical foundation of stock prices. The problem, of course, lies in the fact that these profits – present and future – may present negative surprises. But hope is the ultimate goddess.
Where instead the expectations about the future seem to blacken is in the gold prices – traditional well shelter according to many – which rockets upwards to touch the historic records of 2011, almost sniffing forthcoming catastrophes.
In short, investors in actions and investors ingold they should agree...
