The Long View

This correspondent is a fan of data sets that are longer than yesterday’s news. For example, when I see a table or better yet a chart I immediately look at the time frame of the data set. For many things in business, economics, or politics time frames of several decades rather than a few years provides a context and perspective not provided by narrower time spans. For specific companies, it is so much more illuminating to see data sets representing all or a great part of the company’s entire history rather than just the last few years.

For example the Economist recently published an article on the yields for government bonds, such as those for the U.S., the U.K., and Germany:

America can now borrow from the bond markets at a cheaper rate than at any time in the history of the republic. Germany has raised two-year money for a fraction of a percentage point. Even Britain, a weaker economy than either of those two, is enjoying yields on its ten-year bonds that are at an all-time low.

The deteriorating state of government finances and their rising debt-to-GDP ratios mean there are lots of these bonds to buy. Nevertheless, thanks to the global economic slowdown and the European debt crisis, the demand from savers for safe assets has overwhelmed the supply. Investors have poured $190 billion into global bond funds this year, according to EPFR Global, a data company, while other funds have seen a net outflow of $1.34 trillion. Almost $1 trillion has gone into bond funds since the start of 2009.

Even negative interest rates do not deter investors. The yield on short-term Treasury bills has occasionally been negative in recent years without affecting demand. Safety is all: this is one of those times when, as they say, it is the return of capital not the return on capital that matters.

But it is more than just one of those times. There have been crises before, but not even the Great Depression pushed bond yields down this far or this widely. The records being set in the markets are due to a combination of peculiar circumstances, cyclical swings and historical shifts. Together they have produced a bond market which is behaving in a way never seen before.

But what is cool is the time span of their run chart showing U.S. and U.K. bond yields: from 1791 to 2012.

By the way, on July 17 1791, the Champ de Mars Massacre occurred during the French Revolution. Perhaps as notable is that Mozart’s The Magic Flute debuted in September 1791.

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