Updated: Aug 29, 2021
You may have known or may not have known but the bond market is kind of in a crisis considering the fact that either way they go it can lead to a possibility of higher inflation and lower growth. The economy has not seen or talked about this since the 1970’s, when stagflation was prominent (the mix of higher prices and lower growth). But as it seems we are hearing more about stagflation when it comes to the advancement of growth. “The market is trading on the stagflation theme,” quoted by Aneta Markowska, in which she holds the position as chief financial economist at Jefferies. She stated, “There’s the idea that these price increases are going to cause demand destruction, cause a policy mistake and ultimately that slows growth.” Well I know y’all are wondering what does that mean? To put it in layman’s terms - once prices are raised, the demand for it becomes diminished and ultimately the value for it becomes unnecessary to the point where people wouldn’t demand it, which can slow the growth of a lot of businesses amongst other things.
All of these concerns spiked after seeing decreasing numbers in the 10-year treasury yields from at its peak in March of 1.75% to 1.18% earlier this week. This drastic change assumed that the decrease in trade yields means that investors are buying up bonds, which can lead to an increase in prices.
This is only an quick overview in something that’s going on in the economy. There is a lot happening in the economy right now but hopefully this provided insight into one of the topics. The more you know, the more you’ll understand. Happy Sunday! Like, comment, reach out. Until next week!