I love these giant long term charts. This one covers more than two centuries. It looks at long term US interest rates — the 30 year bond where available:
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Click to enlarge:
Source: What Drives The Bond Market?
Chicago CFA Handout by Bianco Research LLC
January 18, 2011
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Money is power, & you ought to be reasonably ambitious to have it." —Russell H. Conwell, Temple Univ, 1877
"It's the end of the world as we know it and I feel fine" say the French as consumer confidence in May rose to the highest since Nov '10 as they welcome and get excited about new Pres Hollande. Also, the French 10 yr bond yield touched the lowest on record this morning. June consumer confidence in Germany held at 5.7, just .2 pts off the highest since Mar '11. To the euro bond debate which is now taking on greater rhetoric with those with high bond yields wanting them and those with low ones saying no way, ECB member...
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January 19th, 2012 at 12:12 pm
Looks like it could be approaching a bottom sometime in the next 10 years. TBT might reverse split a few times by then.
January 19th, 2012 at 12:39 pm
Thanks for posting…
This chart really highlights the dramatic (from a long-term historical perspective) drop in interest rates since the early ’80s…
January 19th, 2012 at 12:51 pm
Anyone buying bonds after seeing this chart is daft.
January 19th, 2012 at 12:55 pm
Would the long term interest rate trend since 80′s be considered a “tailwind” for the economy and stock market?
January 19th, 2012 at 12:59 pm
Another awesome chart from Bianco.
REQUEST:
Please plot this against a second line (secondary axis) that shows Federal Debt / GDP ratio. Resulting pattern (lack thereof) may be interesting.
January 19th, 2012 at 1:00 pm
looks like it is predicting another WW to me.
January 19th, 2012 at 1:03 pm
[...] Even one a multi-century scale interest rates are low. (Big Picture) [...]
January 19th, 2012 at 1:27 pm
@dan10400 or another excursion into the ME deserts. That would be our just dessert for running up such debt.
The establishment of the FED did not seem to increase stability.
January 19th, 2012 at 1:28 pm
Interesting char their. So, the base print WAYYYYYY back in 1790. Looks to be about 6.5%. Was that set by the founding fathers? Can anyone tell me wha the long term average rates is going back to the beginning. Based on looking at the chart, I can assume it would be at or near that very 6.5% rate.
The Founding fathers were way smarter than us. We have fucked everything up beyond belief. BUT…based on current government views….all those founding fathers would be considered domestic terrorists, and thanks to the newly enacted NDAA would probably be rounded up and shipped off to some prison somewhere. Disagreeing with our leaders is dangerous to ones well being. In fact….reading my post could be considered dangerous as well. That’s OK, we have people like Winston and O’brien out there to fix postings like this. Some time in the future my post will read soemthing like, “Our double plus good leaders have saved us all from our own self destruction” Now move on and go read about American Idol.
January 19th, 2012 at 1:28 pm
what a handsome chart !
January 19th, 2012 at 1:34 pm
The “noise” since ~1990 is a noticeable difference from earlier up/down swings. Any idea why or the implications? Just information and prices moving faster (computers everywhere) or is there something more, such as a much more global economy?
January 19th, 2012 at 2:33 pm
Simply scary!
What comes down will go up, when (? DEBT de-leveraging vs Monetization ends? ) then imagine what would this chart look like? Look what happened right after 1945!
January 19th, 2012 at 3:05 pm
I also love these charts & types of posts & the thoughtful analysis that goes with it — the main reason I frequent this site. Is there a tag you could mark these historical charts with? Like, say, “chart p**n?”
January 19th, 2012 at 4:30 pm
VennData said Anyone buying bonds after seeing this chart is daft.
Lots of people said similar things in 1937 I’m sure (and about Japanese bonds in 1997)
January 19th, 2012 at 5:22 pm
This chart tells me:
- interest rates can stay v v low for a v v long time (see 1940-1950)
- interest rates are heading lower over time
- the 1970s and 1980s were an anomaly. for most the first half of the century 10-yr rates were 4% ish.
I think a lot of people miss… there is a supply/demand issue here. The only time rates will go higher is if there is a huge demand for borrowing and risky assets, either bc of inflation (doesn’t seem to exist) or euphoria. People seem to like safety and thus there is unlimited demand for US treasuries at less than 1%. Why pay more?
Right now 5-1 ARM mortgage rates are 2.25%… is everyone out there borrowing to buy bigger houses? Not enough demand… they go lower.
January 19th, 2012 at 7:06 pm
bottled lightning Says:
January 19th, 2012 at 1:34 pm
“The “noise” since ~1990 is a noticeable difference from earlier up/down swings. Any idea why or the implications? Just information and prices moving faster (computers everywhere) or is there something more, such as a much more global economy?”
As the government continues ignoring the lack of wage growth, problems in wealth disparity in favor of special interest campaign bucks, the Fed is forced to counter with lower rates to induce credit to compensate for diminished consumer buying power.
Marriner Eccles, Fed chair from 1934 to 1948, noted this over 60 years ago, likening unregulated capitalism to a game of poker where the losing players are forced to borrow more and more until they can no longer pay the debt they incur just to stay in the game.
This was his explanation for the cause of the Great Depression.
January 19th, 2012 at 7:22 pm
Luck of the draw. My parents bought their first house (mortgage) in 1950 and I bought my first house in 1982. :-0
January 19th, 2012 at 8:01 pm
For those looking for a bottom in this chart, a gentle reminder that the equivalent Japanese chart would be flat at around 0% for the last 15 years or so.
January 19th, 2012 at 9:45 pm
Thanks for the long chart. They are great.
January 19th, 2012 at 10:50 pm
What drives the bond market? Gee, let’s see:
http://research.stlouisfed.org/fredgraph.png?g=4rj
What a shocking correlation…
January 20th, 2012 at 12:16 am
Can you get that in Excel? I’d be curious if a dollar invested in 1812 at the long term interest rate had the same purchasing power today – probably so as a penny invested at 6% interest (which looks about right as the average return over the last 200 years) would be worth $1151 today (not that you’d be enjoying your gains after 200 years, but it does go to show why wealthy families stay wealthy).
January 20th, 2012 at 1:00 am
What do long term low rates mean and what is the implication? curious student here.
January 20th, 2012 at 9:34 am
[...] 222 Years Of Long-Term Interest Rates | The Big Picture [...]
January 20th, 2012 at 8:19 pm
Would be interesting to overlay debt/gdp ratio on same graph. Would show that the US cannot afford to raise interest rates – since it would go bankrupt (see Japan…) pretty quickly. So risk in US bonds might not be that high in USD terms, but a poor bet in other currencies…
January 20th, 2012 at 9:12 pm
[...] 222 Years of Long-Term Interest Rates - The Big Picture [...]