Greenspan Sees Bond Yields Climbing as High as 5 Percent Again

07-Nov (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan sees longer-term market interest rates increasing as inflation takes hold in the U.S.

“If the early stages of inflation, which are now developing, would take hold, you could get — fairly soon — a fairly major shift away from these extraordinarily low yields on 10-year notes, for example,” Greenspan said in an interview on Bloomberg Television on Monday. “I think up in the area of 3 to 4, or 5 percent, eventually. That’s what it’s been historically.”

The target range for the Fed’s main policy rate is 0.25 percent to 0.5 percent, and the yield on 10-year Treasuries remains below 2 percent. Greenspan reiterated his often-repeated point that such low rates are unsustainable in the longer run, and said that he sees nascent inflation as the possible end to the bond bull market.

“We’re moving into the very early stages of inflation acceleration,” Greenspan said. “That could be the trigger.”

[source]