What were factors that led to a decline in bond yields during World War II given that the opposite should have happened?
score:8
Bond yields dropped as it became more and more apparent that the United States would win the war. Then the war expenditures were seen an "investment" in a lasting and durable peace. At the end of World War II, the U.S. had 50% of the world's industrial capacity, up from 40% before the war (according to Paul Kennedy in "The Rise and Fall of the Great Powers).
The great fear was NOT that the borrowings were "too high" and could not be repaid. It was that the Axis would win and not honor the U.S. issued bonds.
Or, more likely, they might "draw" and start a Cold War that would keep bond yields high. Bond yields did, in fact rise through the 1950s (and later), as a result of the Cold War against the Soviet Union. That was a factor in the multi-decade bear market in bonds that lasted until the early 1980s.
One reason for the spike in interest rates in 1980 was the Iranian hostage crisis. Basically, an attack on the 52 American diplomats was an attack on U.S. world power and leadership, leading to a rise in yields.
Geopolitical factors sometimes "trump" economic ones.
Upvote:4
The return on a bond can, to a first approximation, be thought of as the inverse of it's price. When bond yields drop this means their price rose - due to either decreased supply or increased demand. In the Forties the U.S. economy started to recover from the Great Depression; people got jobs again, and the demand for some place to keep the earned savings safe grew; so bond demand rose; and the price went up reflected in decreased rates.
In the cold war inflation started, first slowly and then more rapidly through the early 1980's (when mortgage rate in North America topped out at 20% per annum). This increase in inflation must be compensated by a lower price for a long-term investment such as bonds, reflected in continual increase in rates.
Then as inflation rates started dropping again the demand for bonds again rose, increasing demand and increasing prices, reflected in dropping rates.
More post
- 📝 What was the expected retirement age for men in Spain in 1936?
- 📝 Is Maxwell really owner of Maxwell's Equations?
- 📝 What was middle class in Sweden in WW1?
- 📝 How many people died in the nazi concentration camps and death trains and marches?
- 📝 Italian & Italian-American Internment camp locations in the United States in WWII
- 📝 How did German racial laws affect people who weren't Jewish but one of their parents wasn't German?
- 📝 How did the Russian-American Company hire serfs?
- 📝 What was the order of precedence for ancient China nobility ranks?
- 📝 What is the significance of barley as opposed to wheat in Ancient Rome?
- 📝 Did Soviet people know Stalin's birth name?
- 📝 Authenticity of the Russian birch bark manuscripts
- 📝 How frequent were murders by Mormon Danites in the 1850s?
- 📝 Is there a name for the WPA Art Style?
- 📝 What is the explanation of president Gen. Yahya Khan's role in the general election of 1970?
- 📝 Can someone identify this uniform?
- 📝 Are there any scientific estimates for the population of Mycenaean Greece?
- 📝 Has a food taster ever thwarted an assassination attempt?
- 📝 Sources for letters written during the Boer Wars?
- 📝 When has a sovereign state last given territory to another as a gift?
- 📝 What is the evidence that Galerius raised Severus II to the rank of Augustus?
- 📝 When was the first electrical intra-battlefield communication?
- 📝 How might someone have gotten a note forwarded from a transport train headed to Auschwitz?
- 📝 How close did the French come to digging a canal across the Isthmus of Kra in the 1880s?
- 📝 Was any pope imprisoned during his service to Catholic Church?
- 📝 What happened to Marcus Licinius Crassus' Gold?
- 📝 What were an American soldier's chances of being wounded on the front lines of Vietnam?
- 📝 How did the Druids learn the Greek language by the time of Caesar's campaign in Gaul?
- 📝 How were maps drawn and printed in the late 19th-early 20th centuries?
- 📝 Did Goebbels realize that his wife used to know Arlozorov?
- 📝 Vatican hidden (secret) rooms and passages?
Source: stackoverflow.com
Search Posts
Related post
- 📝 What were factors that led to a decline in bond yields during World War II given that the opposite should have happened?
- 📝 What factors led to much higher US war bond sales and participation rates in WWII over that of WWI?
- 📝 What were the factors that led to stagflation in the United States during the 1970s?
- 📝 What were the factors that caused the world to move away from the Gold Standard in the 20th century?
- 📝 What were the individual soldiers motivated by during World War 1?
- 📝 What specific changes were made to political ideologies around during and before World War I?
- 📝 What were the factors that caused debtors' prison to disappear in most parts of the world in the 20th century?
- 📝 What were the factors behind the lowest AAA corporate interest rate in U.S bond history during 1946?
- 📝 During World War II, were there any parts of the Japanese overseas empire that was capable of local re-supply?
- 📝 What are the factors that caused the new world civilizations to be less technologically advanced than the old world?
- 📝 What were Germany's long-term aims in World War I?
- 📝 What kind of ink was used by medieval scribes in Iceland, given that there were no plant galls for iron-gall ink?
- 📝 What did Germany do after World War II to recover so successfully that it became more prosperous than its WW2 victors?
- 📝 What were the post World War 2 effects on Germany?
- 📝 During World War 1, were any policies in place to handle large scale troop mutiny?
- 📝 What goods did Germany trade during World War II, and with whom?
- 📝 What was the liquor that was based on petrol which was produced in the USSR during the Second World War?
- 📝 Did Emanuel Lasker write a book declaring that Germany had to win World War I if civilization were to be saved?
- 📝 What factors related to the Eastern Crisis contributed to the outbreak of World War 1?
- 📝 How were the Bulgarians regarded by the Nazis during World War II?
- 📝 During World War I, why were church bells stopped until the war was over?
- 📝 Were there any war movies made during WW2 that were well regarded by front-line American soldiers?
- 📝 What percentage of British and American troops were involved in direct combat with enemy in World War II
- 📝 What led to American air superiority over the Axis in World War II
- 📝 What weapons were manufactured in India by the British forces which were used during world wars?
- 📝 What were the factors that aided Margaret Thatcher in her victory against the trade unions when her predecessors failed?
- 📝 Millions of pictures and countless hours of video were taken during World War II. Why is it so hard to find archives online?
- 📝 What were Hiroshima and Nagasaki known for prior to World War II?
- 📝 What benefits were there to the USA of developing both Uranium and Plutonium bombs in World War 2?
- 📝 What factors led some South American governments to be sympathetic to Nazi war criminals?