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
- 📝 Where Are The Jane Fonda's Of Yesteryear?
- 📝 Why does Brazil have many more Italian descendants than the U.S. or Argentina when the latter two received more Italian immigrants?
- 📝 What was the fate of most SS members after World War II?
- 📝 Did East Asian responses to the Spanish Civil War divide along 'party lines'?
- 📝 Who are the people walking with Hitler?
- 📝 Was smoking ever considered a throat cure?
- 📝 Can anyone help me identify this Coat of Arms?
- 📝 Did indebted families commonly sell daughters into prostitution in Japan?
- 📝 Is there any evidence of modern technology today that has been rediscovered?
- 📝 What language was spoken between Mary of Burgundy and Maximilian I
- 📝 What is the historical relationship between Yule and Christmas?
- 📝 Did Soviet people know Stalin's birth name?
- 📝 Did Christians ever use crucifixion as punishment?
- 📝 Why were cobblers so radical?
- 📝 Given their reputation for fighting to the last man in the Pacific, why did 700,000 Japanese troops surrender in Manchuria?
- 📝 Was there an alcohol abuse problem among monks and priests in the High Middle Ages in England?
- 📝 Can someone tell me more about this dagger with a bronze hilt?
- 📝 The Goths and The Roman Empire (Alaric)
- 📝 Why was a convicted Nazi war criminal buried with military honours?
- 📝 When did Kakinoki Kinsuke used a kite to enter the Nagoya castle
- 📝 Age of majority in Washington state in 1945?
- 📝 Has a head of state ever actually killed another in battle?
- 📝 How successful was Odessa GubCheKa against criminal gangs in the 1920s?
- 📝 Which 11 countries were democratic in 1941?
- 📝 What do we know about the squadron that evacuated Moore's force after Corunna?
- 📝 Which WWII Medal and ribbon are these?
- 📝 During the defense of the home islands, what was Japan's plan for its forces off-island?
- 📝 Does (or did) any monarchy have a limited length of tenure?
- 📝 What was the difference in the minds of the Romans between human sacrifice and gladiator games?
- 📝 Were there any Chinese expeditions to explore the world? If not, why not?
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?