It's amazing how often in finance relationships which seem self-evident - like higher government debt and deficits leading to higher bond yields - turn out in practice either not to hold, or even to work in reverse much of the time. My FT article on this was actually a summary of a longer piece, with much more data from multiple bond markets over the past 150 years. While that one lies behind the paywall, an article about another counterintuitive relationship - the impact of QT on bond yields - is now free to view at satoriinsights.com.
Very insightful Matt King. On a related note, the below paper quantifies the extent of financial repression in Japan and highlights how dependent the Japanese fiscal policy is on its continuation - with significant ramifications on debt sustainability, wealth distribution and phasing out of yield curve control. https://s3.amazonaws.com/real.stlouisfed.org/wp/2023/2023-028.pdf
How do you exclude reverse causality? Lower rates leading to more debt?
Excellent article
Thomas Wynne
9mo
great piece Matt
Adj.Professor Financial Markets, Credit and Banking @ Unicatt, Milan. CrudeOil, NaturalGas specialist. Tweet @degiorgiod
9moLoved this Matt King - always constructive to ponder about counter-intuitive facts. I'd point to two competing aspects here. A) deglobalisation of the manufacturing sector and the black-hole Energy Transition is as structurally loss-making businesses are funded by endless State sudsidies (see https://twitter.com/degiorgiod/status/1670498834336608258?t=CbYPjXa02gEcLEJb4Nlg9g&s=19) B) ageing population. For the likes of Italy this is lethal after a decade of Rates Cancel Culture (my own ©, see https://twitter.com/degiorgiod/status/1620841903125299201?t=NEc_FxOl5JhDo2lg_frOUQ&s=19).