At first rates rise very slowly then suddenly very fast
That 3.00% percent milestone in interest rates that analysts warned about is just around the corner. 10-year US Treasury Bonds are now trading at a yield of 2.919.
A few things to note:
- It is now at highest level since 2014.
- Last highest print was 3.036 in December 2013.
- Rising interest rates could lead to a correction in gold, bonds, stocks and property.
- At first it could rise slowly and then suddenly very fast.
- Analysts say they are surprised by central bank rate hikes but there is also a school of thought that central banks are merely responding to market rates.
- Rising US yields could cause traditionally attractive high yield currencies such as AUD to fall against the USD as carry trades unwind. For example, AUDUSD topped recently on 29 January – the same day US 2-year yield overtook return on the AU 2-year.
- At the moment, CME Fedwatch Tool probabilities indicate 2 rate hikes from March to end of 2018.
- It is a good time to pull out this very entertaining video of Mr Hu Li Yang speaking (in Mandarin) at the 2013 Shares Investment Conference.
- Many people say interest rates will not rise quickly.
- Interest rates will rise faster than you imagine.
- Many people say interest rates rise because of economic recovery.
- Interest rates rise because of expectation.
- When people expect interest rates to rise they start borrowing but when everyone borrows, rates will rise very quickly.
- Many people say rates will rise slowly in steps of 1/8, 1/4, interest go up very slowly.
- The speed will be very fast from 2 – 4%.
- I have seen it double in 6 months.
- Be prepared.
- Once rates rise, gold will fall, bonds will fall, stocks will fall, property will fall.
- People tell me they feel sad for their children because they cannot afford property anymore.
- Property prices have risen so much they cannot afford in their lifetime.
- I tell them they worry too much.
- 10 years later your children will tease you because their property will be cheaper and bigger.