Get Ready for Great Bond Bust of 2020
- Gavekal’s Will Denyer shows savings patterns linked to yields
- Coming shifts in savings suggest game changer looming in 2020s
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The “global savings glut” is perhaps the most famous theory behind the three-decade slump in bond yields. That glut has stopped growing, and will start shrinking in a few years, in a potential game changer for markets, Gavekal Research Ltd. analysis indicates.
What propelled the glut was demographic patterns in big economies that saw a surge in the share of people aged 35 to 64, which tend to be years of high savings, Will Denyer, an economist at Hong Kong-based Gavekal, wrote in a report this month. When those demographic patterns reverse, the implication will be potentially “big rate rises” and the risk of a “major fall” in global equity valuations, he wrote.