What the hell is going on in the bond market?

GRULSTMRNN said:
Did you check dollar yen post 2008? Yet many Japanese companies still turned a healthy profit. I strongly believe the number one aspect of a solid and long term profitable business is a high quality, durable, and well designed product. Take a look what kind of cars Audi, Porsche, BMW, and Mercedes are pumping out year after year. The US can put up as many tariffs they want and the Euro can go down or up and yet all the above car makers will make healthy profits. On the contrary, you can save and rescue Ford and GM as many times as you want and yet they make shit products (mostly) and will struggle time and again. It's the product that is key not the exchange rate or other macro factors.
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Didn't work as you describe in the early 90's when Bush enacted a Luxury Tax. Im sure the existing boat manufacturers remember. And all the luxury import car mfgs, well, AFTER experiencing significant sales drops, they contributed heavily to various PACs and politicians, and stepped up lobbyist actions. Additionally luxury auto mfgs were logically forced to offer rebates and incentives SPECIFICALLY to offset the luxury tax. Clinton ultimately repealed the tax.
 
So what? A little dent in sales those years, those who made great cars are they still alive today? They are. Proves my point, a great product survives those relatively small issues. Even those issues may seem a big deal when they happen. Keyword: "in the grand scheme of things"

tiddlywinks said:
Didn't work as you describe in the early 90's when Bush enacted a Luxury Tax. Im sure the existing boat manufacturers remember. And all the luxury import car mfgs, well, AFTER experiencing significant sales drops, they contributed heavily to various PACs and politicians, and stepped up lobbyist actions. Additionally luxury auto mfgs were logically forced to offer rebates and incentives SPECIFICALLY to offset the luxury tax. Clinton ultimately repealed the tax.
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marameo said:
I'd like to know what an inverted yield curve can cause for real economy.
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I'm no expert on bonds but I'll give a comment.

Normally, the yield curve is upward sloping due to the fact that inflation is being priced in. The forward coupon payments and face value are being discounted against inflation.

More distant maturities are affected more strongly. So, if the short term paper is yielding higher than say the 10-year it means that portfolio managers are selling their short term bond holdings and moving further out on the curve.

This is because they think the FED will cut rates soon (bullish for bonds) because a recession is coming (reduced inflation).

Basically, reduced inflation boost long term paper more than short term.
 
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Scataphagos said:
'Cause Trump threw a fit!
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I doubt that is the reason.
US Treasuries are paying more than most countries. There are currently over $17 Trillion in negative rate bonds worldwide.

The Fed is way behind in the race to the bottom. Higher rates on Treasuries mean bigger deficits for the gov't.

Switzerland AAA 10yr rate: -0.983%
Germany AAA 10yr rate: -0.702%

The US 10yr yield @ 1.5% is even much higher than (PIIGS) BBB-rated Portugal.
Portugal BBB 10yr rate: 0.142%

http://www.worldgovernmentbonds.com/

P.S. I am not a fan of negative rates; it hurts savers, keeps zombie companies afloat, etc.
 
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