Thursday, June 12, 2014

Countries With Lower 10 Year Bond Yields Than U.S.

U.S. 2.59%
Canada 2.35%
Germany 1.38%
France 1.75%
Netherlands 1.64%
Switzerland 0.74%
Japan 0.59%
[source]

Even much worse credits like Spain, Italy, Portugal, Mexico have yields only barely higher than the U.S. Treasury yield.

2 comments:

Nathan said...

I wonder if an analogy to oil prices would help people see why further interest rate increases are unlikely. For example, if we compare two scenarios,

1) The US currently consumes ~7B barrels of oil per year. For oil to rise $50/barrel, the US economy would need to come up with an additional $350B/year for the privilege of using the same quantity of oil.

2) The US currently maintains ~$60T in total debt. For rates to rise 1%, the US economy would need to come up with an additional $600B/year for the privilege of maintaining the same quantity of debt (in the long run).

it seems like if we believe 1) is unlikely we should believe the same of 2).

CP said...

Yes, Stagflationary Mark at Illusion of Prosperity has the same theory.

It's similar to my self limiting hypothesis.

Just to be strictly accurate, a lot of the interest payments on the $60T in debt would net out, but yes, I don't think autos or housing could stand significant interest rate increases.