Final Word from Thursday, August 17, 2017

If debt is one of the most powerful forces mankind has ever known, as we wrote last week, bonds are the king of the mountain. James Carville, who was a political adviser to Bill Clinton, once said that if he were reincarnated, he'd like to come back as the bond market, because you can intimidate everybody. No one even knows to what degree Andrej Babiš's low- or negative-interest T-bills as finance minister are intimidating the Czech National Bank. Did the CNB become the first European central bank to raise interest rates because it feared that currency speculators would dump their T-bills and send the crown reeling, instead of rolling them over? Some analysts think so. Higher up the yield curve, Czech real-estate bonds that are paying a near-junk 5% are now becoming popular (and HN began tracking them). Perhaps the scariest thing about bonds is the impact they can have on the lives of people who don't even understand what they are. [Czech Republic EU fixed income]