There is no longer any pretense that America cares about the national debt. That means one thing: more bonds.
It is no wonder that so many long-term bond auctions are turning into nail-biters — not just in the US, but in Japan and Europe, too. After all, who’d buy long-term bonds? Long-term interest rates have become much less predictable, and that means volatile prices for long bonds. Even worse, the normal negative correlation between the bond and stock markets has become less of a sure thing.
Nevertheless, to answer the question: Just about everyone should buy long-term bonds. They may be the best hedge in an increasingly uncertain environment.
The rising yields reflect uncertainty in the market. Inflation is a risk again, which increases yields. Judging from US policy of the last few years, there is no longer any pretense that America cares about the national debt. That means many more bonds will be sold in the future.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
___________________
Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Photo by ANGELA WEISS/AFP via Getty Images
