The REAL Reason Everyone Is Panicking
00:00 That's six different countries, all feeling the same pain in the same week. Some point, the coincidence stops being a coincidence. In the same few days, we saw America's 30-year rate hit its highest level since 2007, Germany's since 2011, the United Kingdom's since 1998, France's since 2008, Canada's
00:17 since 2010, while Japan's hit an all-time high. The obvious answer everyone reaches for is debt. Governments borrowed too much, lenders got nervous, and now lenders want more to keep lending. But, that explanation only gets you so far. Germany is the fiscal conservative of the group. They
00:33 carry the lightest debt load among the G7 economies by a pretty wide margin. But, Germany's long rate still hit a 15-year high anyway, which means there's clearly more to the story. It's not something happening to just one economy. It's happening to everyone, and it starts somewhere nobody was looking with
00:49 one very particular buyer, one that sat underneath every major bond market in the world. That's the defined benefit pension fund. They were patient, had deep pockets, were legally required to show up, and completely unbothered by price. For 50 years, traditional pension funds were the best customers of the
01:06 long end of the bond market. But, they're the last of a dying breed. The Organization for Economic Cooperation and Development is an international organization of 38 developed countries. You can think of it as the Avengers, but for economics. Across its member countries, pension funds domestic bond
01:22 holdings have been cut in half from 8% in 2007 down to 4% last year, because six governments had the same week, and it wasn't for six different reasons. Markets don't do coincidences. When the same thing happens everywhere at once, the story being reported is usually not the story that's actually happening.
There aren't comments yet for this episode. Click any sentence in the transcript to leave one.