Greenspan’s Bond Warning Goes Unheeded

The maestro just ain’t what he used to be. Or is he?

Former Federal Reserve Chairman Alan Greenspan warned in a Bloomberg interview on Thursday that yields on the benchmark U.S. Treasury note could rise to 5%. That would mean a paper loss of about 25%, though he didn’t suggest it would occur overnight.

The yield promptly sank to a two-week low. How different it was 20 years ago, when Mr. Greenspan gave his famous “irrational exuberance” speech about technology stocks: The Nasdaq Composite fell 3.4% from its intraday high to the following session’s low.

After that, Mr. Greenspan’s warning was ignored, and the index soared another 280% in a little over three years before sinking nearly 80%. His bond warning may be right eventually, too, but this time it has been ignored from the start.

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