Carmignac’s Didier Saint-Georges on US Treasury yields


Rising yields in the US are not primarily due to rising inflation or an over-heating economy.

They are due to a major shift in the balance of supply and demand. The US Treasury needs to refinance massive amounts of short term Bills, the rising budget deficit pushes up issues of long term bonds, and there is no more a central bank prepared to buy at any price. Markets are moving from having to deal with an issue of savings glut to an issuance glut.

Therefore, US yields could keep rising, and contaminate world yields, which would not go down well with markets as the economic cycle is peaking.

For markets, what is at stake is the beginning of a reversal of the portfolio rebalancing which started with QE 9 years ago in favor of equities and credit. This reversal would limit the damage on bond yields, but at the cost of a valuation reset for the other asset classes.

Didier Saint-Georges – managing director – Carmignac