20 years of declining interest rates ending

 I've been dithering and delaying for months about some major software updates I needed to do, and as a result I haven't been doing much economic commentary.  I had to change a key program which is essential to easy manipulation of time series in Excel spreadsheets and since VBA (Visual Basic) is such a clumsy language, every time I considered doing it, I put it off to the next day.  Anyway, you'll be glad to hear, I'm sure, that I've finally done the update, and it seems to be working, so far.

Meanwhile, behind the scenes (as it were), I've been extending my interest rate times series backwards.  For over 20 years, I've been updating my spreadsheets with my own fair hand for most major world markets, but I decided I needed to add some smaller and developing economies to the data I monitor.  You can see the first result in the chart below.   It shows average central bank discount rates, weighted by PPP GDP for the world as a whole.  I had been using data for just 50% of the world (mostly developed countries), and the new time series I've added have increased this to 83%.  The biggest economy I added was China, but I also added Turkey, Indonesia, India, Russia, Taiwan and Korea and a couple of others.

The broader average is higher than the older one, reflecting higher inflation rates, but the cyclical movements are pretty similar.  Even though the USA, Europe and Japan haven't (yet) starting raising their discount rates, the world average has started to rise.  Interest rates were cut to emergency lows in response to the Covid Crash, and will now move back to pre-pandemic levels. 

The secular downtrend in interest rates has driven secular bull markets in shares and property, and I expect that a return to "normal" levels will puncture these bull markets.  We  may have already seen the beginnings of that inevitable downturn over the last few days.

I've started the same process that I've done with world discount rates with world bond yields.  I haven't yet got bond yields for all the countries I monitor going back 20 years, but I am gradually extending my time series backwards/  In the meantime, you can see how bond yields have trended sharply upwards in the last couple of weeks, moving to new post-pandemic highs.  Rising bond yields affect (reduce) property and share valuations, eventually.   Not good for these two asset classes.