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The question comes up whenever anyone knowledgeable is asked about the markets: Are we in a bubble? It is almost always about the stock market, which has reached record levels lately despite all the unsettling news. Hardly anyone ever asks about the bond market — but a bond bubble could be far more dangerous than an equity bubble.
It may seem an odd moment for this question, given that nominal yields on 10-year US Treasury bonds topped 4.3% last week. That’s high relative to recent history, but it’s low considering another government figure released last week: 100.2%, which is the US debt-to-GDP ratio as of March 31. That means America’s public debt is now greater than the size of its economy. The debt-to-GDP ratio is expected to reach 107% by 2030, exceeding the postwar high of 106% in 1946.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.