While economists debate whether global bond yields have peaked, and major fund managers allow themselves to hope that the prolonged bond market rout might finally be ending, high-profile financial markets commentator Jim Grant has a grim warning: we could be in early stages of a new bond bear market.
In an interview with the Swiss financial media platform, The Market, Grant suggests that the violent surge in bond yields “raises the interesting possibility that we are embarked on a new bond bear market”. Grant warns that this sudden surge in interest rates “is going to test financial structures that came into being during the period of very low nominal interest rates.”
“Not every company has had to refinance so far, not every private equity company has met a hostile reception in the credit markets, and not every country has had to face the consequences of a potentially ruinously high national invoice for interest expense,” he says.Still, he says, the protracted US bond market sell-off “is properly raising concerns that the March regional banking crisis never ended but only took the summer off”.
“To me, that’s going to be the proximate cause of the next financial difficulties, being part and parcel of the next recession.”Grant, however, is much more positive on gold. The precious metal surged above $US2000 an ounce earlier this month on concerns over the Middle East conflict, but has since edged slightly lower.