22 Sept 2014 Minimum by "Worst Case" by
Country 10 year yield Dec 2016 Dec 2016
USA 2.56% 4.50% 6.50%
UK 2.49% 4.50% 6.50%
Japan 0.55% 1.30% 3.00%
Germany 0.96% 2.00% 3.00%
Spain 2.20 % 4.20% 7.00%
Italy 2.38% 4.40% 7.00%
How do I come up with the above figure by December 2016 well it is all a bit heuristic but I do think the end of Quantitative Easing by the by the Federal Reserve will mean the bubble begins to unwind march 2015 onwards and UK and US interest rates are around 2% less than they ordinarily should be. Germany might be seen as a safe haven and therefore not suffer so much in a bond rout. Spain and Italy are also a minimum 2% too low. In a worse case scenario there is much more of a global rout and yields go up far more rapidly and the safe havens of Germany and Japan and the other 4 countries. Even my minimums will mean BIG losses for Treasury holders. I don't expect a Greek type of rout when Greek bond yields went from 4.5% to over 30% ! Japanese bond yields are currenctly a joke at 0.53% when the government has a 2% inflation target to be met by printing money like crazy it also has the highest national debt of 240% of GDP. Rigged markets eventually blow up and this bond market bubble will too.