An historical turning point

ENTHUSIASTS for chart patterns can on occasion take rather too determinist a view of history, trying to shoehorn all developments into a fixed cycle or rhythm. But charts can still reveal some wider truths. Kit Juckes of the Ecu group points out that the yield on the 30-year treasury bond yield has moved above its 100-month average. This average has been trending down since the mid-1980s so this is quite a moment (as of last night's close, the yield was 4.84% and the average was 4.71%).

This suggests the long post-Volcker period of declining yields has finally ended. Volcker established that a central bank, when acting decisively enough, can break inflation. But fighting inflation has eventually taken second place in central banks' priorities to rescuing the economy and the financial sector. Of course, inflation is still currently low but investors are starting to demand a premium for the risk that fiscal and monetary policy will eventually generate higher prices. And, as the Greeks are discovering, rising bond yields add to the problems of a government with a weak economy and huge deficit.