Greenspan Sees No Stock Ex­cess, Warns of Bond Bub­ble

The Economic Times - - Money -

New York: Eq­uity bears hunt­ing for ex­cess in the stock­mar­ket­might­be­bet­ter off wor­ry­ing about bond prices, Alan Greenspan says. That’s wherethe­ac­tu­al­bub­bleis, and when it pops, it’ll be bad for ev­ery­one. “By any mea­sure, real long-term in­ter­est rates are much too low and there­fore un­sus­tain­able,” the for­mer Fed­eral Re­serve chair­man, 91, said in an in­ter­view. “When they move higher they are likely to move rea­son­ably fast. We are ex­pe­ri­enc­ing a bub­ble, not in stock prices but in bond prices. This is not dis­counted in the mar­ket­place.”

While the con­sen­sus of Wall Street fore­cast­ers is still for low rates to per­sist, Greenspan isn’t alone in warn­ing they will break higher quickly as the era of global cen­tral-bank mon­e­tary ac­com­mo­da­tion ends. Deutsche Bank AG’s Binky Chadha says real Trea­sury yields sit far be­low where ac­tual growth lev­els sug­gest they should be. Tom Por­celli, chief US econ­o­mist at RBC Cap­i­tal Mar­kets, says it’s only a mat­ter of time be­fore in­fla­tion­ary pres­sures hit the bond mar­ket.

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