<<In the 1960s, yields on long-dated governments routinely were in the 4 percent zone, while in the 1950s, they returned 3 percent or even less! These are relevant comparisons because one of the fundamentals that determine long-term rates, inflation, is as low today as it was in the 1960s and 1950s. In the past, bond buyers were satisfied with a yield some 3 percentage points over the rate of inflation.>>
This is a very good example of UNinformed journalism there is so much around these days.
The truth is that in the 1950's and 60's, as was the case since the 1930's, Treasury set the rates, not the market. They could do this because most Treasury debt was in savings bonds and total Treasury debt was only a small fraction of GDP. Only in the 1970's, when inflation shot up, the Fed + Treasury changed the policy. |
