The Bizarro World of Bonds Keeps Get More Bizarre

by Richard Barley, Wall Street Journal
David Stockman’s Contra Corner

Central banks have always been able to make waves in markets. But never have they had such far-reaching effects, nor so quickly. The world of bonds is being turned upside down as a result.

Monetary policy traditionally has involved adjusting a short-term rate of interest that can then, over time, affect the structure of long-term rates that are set by markets. But central banks’ bond purchases and ultralow interest rates mean that distortions are rife.

Some ripples are having immediate impacts: the Bank of England’s new quantitative easing program, for instance, has turbocharged the U.K. bond market.

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