I would note that interest rates are arguably below their interest-rate rule levels–it’s not central banks that are big footing the bond market, it is the depressed economy. And it is not as though there were not models: Keynes and Hicks saw what we see back in the 1930s, and Japan has provided an example since the start of the 1990s…

Gillian Tett: After a Life of Trend Spotting, Bill Gross Missed the Big Shift: “The power balance between governments and the bond market has shifted…

…These days it is governments that are intimidating–or, at least, wrongfooting–the bond gurus… unorthodox monetary policy… is shaping bond prices now. And that is making it difficult for bond titans such as Mr Gross to recreate their old magic…. During most of his career, Mr Gross wielded brilliant trend-spotting skills…. Recently his performance has crumbled. This year his flagship fund is in the bottom 20 per cent of industry tables, measured by returns. This partly reflects the fact that low interest rates have cut returns across the board…. But Mr Gross also has been wrongfooted by government. In January 2010 he declared that the British bond market was ‘sitting on a bed of nitroglycerine’, suggesting UK sovereign bond yields would rise. It seemed a rational bet, given that the UK had a 7 per cent structural budget deficit…. Similarly, there was sound logic to Mr Gross’s declarations in 2010 and 2013 that the bull market in bonds was over. But instead of rising, yields fell to new lows in the US and Europe. That is partly because markets are ‘under the spell’ of unconventional monetary policy, as the Bank for International Settlements says…”