Bond Market Has Turned Into a 'Giffen Good': Sri-Kumar

The video explores the concept of Giffen goods, which are essential items that defy typical economic theory by increasing in demand as their prices rise. This is illustrated through the historical example of the Irish Potato Famine. The discussion then shifts to financial markets, where bonds are likened to Giffen goods due to their increasing attractiveness as yields decrease. The video concludes with an analysis of market trends and predictions, particularly focusing on US Treasury and German bonds, highlighting potential economic impacts.

What is a Giffen good?

• A luxury item that people buy more of when they have more income.

• A product whose demand increases as its price increases.

• A product that is not affected by changes in price.

• A product whose demand decreases as its price increases.

During the Irish Potato Famine, how did the Irish respond to rising potato prices?

• They stopped buying potatoes altogether.

• They bought more potatoes despite the price increase.

• They switched to alternative food sources.

• They started growing their own potatoes.

How does the concept of a Giffen good apply to bonds?

• Bonds become more attractive as yields decrease due to market fear.

• Bonds become less attractive as yields decrease.

• Bonds are only attractive when yields are high.

• Bonds are unaffected by changes in yield.

What is the prediction for the US Treasury yield according to the discussion?

• It will remain stable at 202 basis points.

• It will fluctuate unpredictably.

• It will increase to 250 basis points.

• It will decrease to zero in the next few years.

What could be the consequence of the German bond yield going significantly negative?

• A severe economic crisis in Germany.

• A global economic boom.

• An increase in German exports.

• A stable German economy.