After years of low yield on fixed income instruments, we are finally seeing the yield rise enough to make it worth it. As illustrated above (I took the screenshot from Schwab this morning), you can put your money into a 12-month treasury bill and earn a solid 4.06% risk-free return. It doesn’t quite beat inflation but is pretty solid compared to other alternatives.
WSJ has a whole article talking about this. In short, the super low rates forced people to over index on equity and now people are moving back to fixed-income to match their risk profile better. Author Nassim Taleb is not a big fan of the low interest rate policy and he went pretty far by saying
"We've had 15 years, 14 and a half years of Disneyland that basically has destroyed the economic structure. Think about it. No interest rates,"
At zero interest rates … for long periods of time, you are hurting the economy. You're creating bubbles, creating tumors like bitcoin, creating hedge funds that should not exist but have existed for 15 years
I believe most economists/policy makers think as long as the inflation rate is low, they keep the interest rates low and there’s no harm. But now we are seeing severe consequences of the overinflated asset prices due to low interest rates. When the overinflated asset prices come crashing down, it dramatically reduces investors’ appetite for risk taking. The over-leveraged are getting liquidated and the over-debted are going broke. I do think this interest rate rising cycle is a good opportunity to reset expectations about interest rates. I agree the 0% interest rate is not long term sustainable and a long term 3-5% rate is healthier. 3-5% is not too high to obliterate real estate and business investments and not too low to encourage over-leveraging and speculation. I hope the Fed will raise the rate to ~4% and keep it there for a few years. It would take some adjustment but it will be better for the long run.