John Ward – Interest Rates : More Signs That They Can’t Be Controlled

JohnWWhether they like it or not, debtor nation borrowing rates are rising

I get a terrible feeling some days that nobody at the top is paying attention 95% of the time; and on those rare occasions when the MoUs are awake, they plump with clinical accuracy for the route that is doomed. Alongside this more or less continual train wreck are 56 million people clearly so busy doing something, they don’t have time to notice the trackside strewn with wrecked carriages and horribly twisted bodies as they race by on a TGV towards the cliff.

Two years ago, I posted this piece bluntly pointing out that the Lloyds branches sale would end in tears. It certainly did for the Co-op, which – following the Britannia marriage from Hell and the exposure of undercapitalisation – now faces the UK’s first bailin. Nobody seems to have noticed that between them, Ministerial dating agencies, the EU, reckless Co-Op management and banking insanity have done for a huge mutual concern…and that we’re going to be paying for it. So when the neoliberals rewrite yet more history, there won’t be any outcry.

Six months ago I devoted the second half of this Saturday Essay to pointing out why, come what may, interest rates must rise….whatever Fred Karno at the Bank of England says. Yesterday the interbank mortgage rates were reported to be on the rise. “It shows that while Carney says one thing, the markets think another with at least one base rate rise priced in,” according to Mark Harris of mortgage broker SPF Private Clients. “Can he really keep a lid on rates until 2016?” To which the obvious answer is, no. The piece about this at the Telegraph yesterday afternoon has thus far garnered…just 19 comments.

Yesterday, the yield on the 10-year German Bund was, at 1.81%, just a rice-paper off a 16-month high it hit two months ago. And this despite the “eurozone out of recession” bollocks of earlier in the week. Across the pond, 10-year US Treasury bond yields at 2.71% are in turn very close indeed to a two year high.

On Tuesday, The yield on 10-year UK gilts rose above 2.6% – the highest since October 2011.

What we’re seeing here is the markets beginning to ignore the bollocks. Take the EU’s “great news” of earlier this week:

“It is, of course, appropriate to temper any euphoria about today’s upside news with a reminder that, in our view, the recovery in the euro area will be protracted and somewhat underwhelming,” said James Ashley, senior economist at RBC Capital Markets, “We see little prospect that this positive second-quarter reading will serve as a launch-pad to a strong resurgence across the region over the next few quarters.”
Or, in a word, phuuurrrt.
Last month, interest rates rose in India, but at the end of the month they were kept on hold by the Government. This made little difference to the country’s banks: within a day of the RBI’s status-quo policy, private sector Bank ‘Yes’ raised lending and fixed deposit rates by 0.5%.
Anyway, here we are on August 15th, a couple of weeks from Labor Day and the end of the European holidays. The entire shtick about ‘interest rates’ is really largely significant in terms of what it costs big Sovereign debtors to borrow. Whether the clowns at the top want it or not, those costs are rising. My view remains that it’s only a matter of time before the markets analyse the corner into which everyone in the West is now painted, and respond. I think they will vote “No Confidence”.
Just watch the sparks fly when they do.

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