Ukraine: bond markets learned the right lines but are on the wrong show

March 7, 2022

Our Stephen Miller shares his thoughts on the parallels between today and the 1970s.

The irrepressibly idiosyncratic Skyhooks in their debut single, Livin’ in the 70s lamented that they “had learned the right lines but were on the wrong show”.

 That might be a metaphor for the current predicament facing both central banks and bond markets.

 In recent decades (post the 70s), periods of pronounced risk aversion were met with an aggressive easing of monetary policy and attendant sharp declines in bond yields. Quiescent inflation smoothed the way for such a response.

 However, persistence in inflation means that such a response to the fallout from the Ukraine conflict may mean that “new lines need be learned because this is a different show”. That “show” now looks like that 70s show!

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