Under the You-Can’t-Make-This-Up category of sovereign debt insanity, the May 17th Grant’s Interest Rate Observer files this report:
Many these days are picking the poison of foreign places – Bolivia, for instance. Last fall, the scenic, private-property expropriating, contract-abrogating and formerly hyper-inflating South American nation issued its first international sovereign debt since 1920. And the Bolivian 4 7/8s of 2022 this year have rallied by 57 basis points, “the most among sovereign bonds with BB-minus ratings tracked by Bloomberg.” [according to Grant’s analyst Evan Lorenz]
The Great Bond Bull Market began in September, 1981 (over 31 years ago) with U.S. T-bond yields over 15%. Yields on the 10-year now stand just a shade below 2%.
Precisely 2 years ago, Jim Grant was quoted in an Associated Press interview:
I think it’s useful to imagine how things might look ten years hence. What will one’s children, heirs or successors think about a purchase today of ten-year Treasurys at 3.25 percent? They’ll look back and say, “What were they thinking?” The (federal deficit) was running at 10 percent of GDP, the Fed had pressed its interest rates to zero, it had tripled the size of its balance sheet, and they bought bonds? Treasurys are hugely uninteresting, as is similar government debt the world over.
Today the Bolivian government can borrow for 9 years at 4 1/2%. Have bond investors completely lost their minds?