Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  The Bond Market Says the Mayans Were Wrong
Posted Under: Markets • Bonds

 
Well, tomorrow, according to the Maya Calendar, the world will end at 11:11 GMT. This got us thinking. Let's go through two scenarios: the first is that tomorrow will be the end of the world: the second is that tomorrow starts utopia. Then, ask yourself what interest rates would be in those two cases.

If tomorrow was the end of the world, it would be your last chance to spend and no one would care what money was spent on today – lavish travel, food, whatever. As a result, the demand for credit (so people could do anything they wanted) would be infinite. Obviously, the supply of credit would be non-existent because no one would expect to be repaid. As a result, even though no transactions would take place, the interest rate would rise to infinity.

If tomorrow was utopia – and we would want for nothing – no one would care about anything today, credit would be available, but there would be no hurry to borrow, so interest rates would approach zero.

So, with 10-year Treasury yields at 1.79%, it appears that the bond market thinks the Mayans were wrong. The end of the world looks to still be a long way off.
Posted on Thursday, December 20, 2012 @ 2:41 PM • Post Link Share: 
Print this post Printer Friendly

These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
Home |  Important Legal Information |  Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2017 All rights reserved.