Short v Long-Term Rates

QUESTION: Hi Mr Armstrong, I have read somewhere that you think that interest rates will go up higher than expected and at faster pace. I don’t understand its relations with bonds. Also your opinion seems to be in clear contrast to everyone else who thinks it will go up slowly over the next few years. If this happened this year, this would be one of your many landmark predictions.
thanks

HH

ANSWER: To some extent, you are mixing short v long-term. The short-term is set by the rates the central banks set. Even this will rise beyond what the central bank desires because of demand.

The long-term is set by the market. That is why the central banks tried Quantitative Easing buying in long-term bonds hoping that would lower the long-term rates which are set by the auction process.

I am not forecasting that the central banks will rapidly raise rate all on their own. They will be forced to follow long-term rates and as Quantitative Easing is reduced, rates will rise when government deficits expand because the fiscal side of the balance sheet has been on life-support by the monetary policy.

Latest Posts

Will the EU last beyond 2026?

Merz is putting all of Germany in the crosshairs. His thirst for war with Russia makes him unfit to be in charge of parking meters for the government. Ask yourself [...]
Read more

Market Talk – July 18, 2025

ASIA: The major Asian stock markets had a mixed day today: • NIKKEI 225 decreased 82.08 points or -0.21% to 39,819.11 • Shanghai increased 17.66 points or 0.50% to 3,534.48 [...]
Read more