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https://finance.yahoo.com/news/infinite-qe-destroying-traditional-bond-174459945.htmlCore tenets such as what constitutes a safe asset, the value of bonds as a portfolio hedge, and expectations for returns over the next decade are all being reconsidered as governments and central banks strive to avert a global depression.
QE Kills Valuation Models -- Ordinarily, the prospect of a multi-trillion-dollar government spending surge globally ought to send borrowing costs soaring. But central bank purchases are now reshaping rates markets -- emulating the Bank of Japan’s yield-curve control policy starting in 2016 -- and quashing these latest volatility spikes.
Inflation Risk -- Many market veterans agree that faster inflation may return in a recovery awash with stimulus that central banks and governments may find tough to withdraw...“There’s tension in all of this,” said Hamish Pepper, fixed-income and currency strategist at Harbour Asset Management Ltd. in Wellington, New Zealand. “I don’t think it’s necessarily about waking up one morning realizing that bond yields should be 100 basis points higher from here -- but you have to think about inflation at some point.”
Haven or Not? -- “Will government bonds play the same role in your portfolio going forward as they have in the past?” he said. “To me the answer is no they don’t -- I’d rather own cash.”
“It’s very hard to look at this in a historical context and then apply an investment framework around it,” said BlackRock’s Thiel. “The most applicable period is right before America entered WW2, when you had gigantic stimulus to spur the war effort. I mean, Ford made bombers in WW2 and now they’re making ventilators in 2020.”