Yield Curve in Hyperinflation

Discussion in 'Financial Futures' started by Cyrix, Jul 15, 2011.

  1. Cyrix



    Does anyone have any data on what the Yield Curve usually does in a hyperinflation period? We have data in the US in the 70s but that's not really considered a hyperinflation/currency crisis.

    For example, what happened to the yield curves of Brazil, Mexico, Argentina, South East Asian countries, or Weimar Republic during the currency crisis?

    Anyone got any data, or some research that has been done on the subject?

    Just want to be prepared for my portfolio positions. Anything can happen.
  2. The answer is that it depends... It definitely flattens, but how much is uncertain.
  3. Cyrix


    This is what I thought, but then I saw this chart from one of the latest Zero Hedge post (much steeper in hyperinflation).

    Hence the question.
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  4. schizo


    Simply put, everyone is betting the rates will rise. But then, as Martin stated, it should flatten.

    BTW should the hyperinflation materialize, what would you expect from China, Japan and other large holders of the Treasuries? That's right.
  5. I would always treat anything posted on ZH with a very large pinch of salt, myself... Can you post the link? I am curious about how they arrive at their conclusions.

    In general, it's clear that the yields in the front end go to infinity and beyond. Further out, much will depend on your assumptions about the impact of hyperinflation on the creditworthiness of the sovereign and the economy in general.
  6. Cyrix


  7. I dunno, maybe I am hallucinating, but that's just a bunch of total and utter nonsensical drivel.

    Moreover, it's just an unexplained assumption that the curves look the way they do. Actually, the more I look at it, the more silly it all looks. I mean why the heck does the "very high inflation" curve go arbitrarily vertical from 20y onwards? Why not 10y or 15y? IMHO, it's load of bollox.