AI And Govt Bond Yields - Onwards And Upwards?
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AI may have important implications for fixed income markets, particularly government bond yields. The impact of AI on interest rates and bond yields depends on the level of productivity growth and the displacement effect on jobs. The conventional view is that AI-driven productivity growth increases the demand for capital, driving real interest rates and government bond yields higher. However, caution is required in drawing inferences from past eras, such as the Goldilocks era. The period of weak productivity growth and low yields from 2007-2020 has been attributed to zero rates 'zombifying' economies and distorting the allocation of capital. The impact of AI on the labor market depends on whether the displacement effect on jobs exceeds the re-instatement effect of new jobs being created. The timing of these effects is crucial, as initial job displacement could lead to lower domestic demand and inflation, potentially forcing a recession. However, in the medium term, higher growth potential could put upward pressure on rates and yields, leading to steeper yield curves. The shape of the yield curve is influenced by factors such as debt/GDP ratios, energy prices, and demographic trends. Overall, the impact of AI on bond yields and curves is complex and subject to various structural crosscurrents.
#Ai #GovernmentBondYields #ProductivityGrowth #InterestRates #LaborMarket #YieldCurves
https://seekingalpha.com/article/4700003-ai-and-govt-bond-yields-onwards-and-upwards
Seeking Alpha /
npub1qpf…damf
2024-06-19 15:40:28
Author Public Key
npub1qpfrthtcf6g8grmwfv45qf28aa4xqk73pgnmwjdfuze8zl2l2cnsewdamfPublished at
2024-06-19 15:40:28Event JSON
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"content": "AI And Govt Bond Yields - Onwards And Upwards?\n==========\n\nAI may have important implications for fixed income markets, particularly government bond yields. The impact of AI on interest rates and bond yields depends on the level of productivity growth and the displacement effect on jobs. The conventional view is that AI-driven productivity growth increases the demand for capital, driving real interest rates and government bond yields higher. However, caution is required in drawing inferences from past eras, such as the Goldilocks era. The period of weak productivity growth and low yields from 2007-2020 has been attributed to zero rates 'zombifying' economies and distorting the allocation of capital. The impact of AI on the labor market depends on whether the displacement effect on jobs exceeds the re-instatement effect of new jobs being created. The timing of these effects is crucial, as initial job displacement could lead to lower domestic demand and inflation, potentially forcing a recession. However, in the medium term, higher growth potential could put upward pressure on rates and yields, leading to steeper yield curves. The shape of the yield curve is influenced by factors such as debt/GDP ratios, energy prices, and demographic trends. Overall, the impact of AI on bond yields and curves is complex and subject to various structural crosscurrents.\n\n#Ai #GovernmentBondYields #ProductivityGrowth #InterestRates #LaborMarket #YieldCurves\n\nhttps://seekingalpha.com/article/4700003-ai-and-govt-bond-yields-onwards-and-upwards",
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