Alan Greenspan Warns Interest Rates Could Suddenly Spike at Any Time

In a recent interview with Bloomberg Radio, former Fed Chairman Alan Greenspan cautioned that interest rates could soon rise at a rapid pace, despite the bond markets sending the exact opposite signal.

Said Greenspan, who headed up the Federal Reserve for nearly 20 years before stepping down in 2006:

“I cannot perceive that analysts can maintain these levels of interest rates for very much longer. They have to start to move up, and when they do, they could move up and surprise us with the degree of rapidity which may occur.”

This suggests that investors should probably look to protect their portfolios against interest rate shocks. Greenspan headed the Fed in a completely different era, however, so there’s some question as to how out of touch he may be in a post-financial-crisis world.

Switching gears, Greenspan also had some gloomy commentary regarding the European Union, saying the 19-nation collective is “unworkable.” He also noted the EU “will break down, as indeed it is showing signs of in many different areas.”

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So far, the markets are ignoring Greenspan’s prognostications. The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ:TLT) was unchanged in premarket trading Wednesday. The largest ETF tied to long-term interest rates offered by Treasury bonds has gained 16% year-to-date.

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