Horseman Capital: “A Sharp Spike In Yields Preceded Every Market Crisis In The Last 20 Years”
by Tyler Durden
ZeroHedge.com
Nov 17, 2016
Earlier this week, when looking at the alarming tightening in financial conditions, we asked if “the market was wrong” and was getting far ahead of itself in extrapolating bening growth as a result of Trump’s proposed policies instead of the risk of a “stagflation bond crash”, something which has emerged as the biggest market whisper risk according to the latest Bank of America survey of fund managers.
Overnight, a similar concern was voiced by Horseman’s Russel Clark who observed that 30 Year Treasury Yields have had a rapid rise since the election of Donald Trump, and then makes the following troubling observation: sharp yield spikes have preceded every major crisis in the past 20 years.
“the problem with sharply higher US bond yield is that this tightens financial conditions. We have often seen rises in yield coincide with financial market crises. A rise in yields preceded the 1987 market crash. A rise in yield in 1994 preceded the Tequila crisis, when the Mexican peso devalued by half. After both events, yields quickly fell to new lows. Yields rose in 1996/7 before the Asian Financial Crisis, and yields again rose in 1999 before the dot com crash. After both events, yields fell to new lows. More recently, bond yields rose in 2006 before the Global Financial Crisis, and again in 2010/1 before the Euro-crisis. There was also a rise in yields before the crash in oil prices in 2014. In all cases yields fells to new low.”
The Rest…HERE
