"Do you really think that interest rates will be sustained on an...

"Do you really think that interest rates will be sustained on an ongoing basis at these sorts of record lows?"

Absolutely not, madamswer. There is no doubt in my mind that interest rates will go up.

It was interesting that China is considering buying less US Bonds in response to Trumps trade actions. That is huge, if it comes to pass. At the same time that the Federal Reserve has begun the process of unwinding its more than $4 trillion balance sheet by tapering back on purchases it makes to replace maturing securities, China may also be buying less. Also at the same time the US Government will be needing to sell more bonds to fund the greatly increased deficit thanks to the corporate tax cuts and other spending measures. The big question for me is where will China then invest its surplus if not in US bonds?

When there are more sellers and less buyers the price of bonds will go down, meaning interest rates will go up.

Yet there is another factor at play which will tend to mitigate the amount of the rise. That factor is the increased rate of gearing, particularly by consumers, following a long period of very low interest rates. This is more the case in Australia than in the US. So, the impact of rising interest rates on the economy will be greater than in the past, as consumers will more quickly respond to tighten their belts and cause lower growth rates. Any sign of a recession and the Fed will again lower interest rates.

I therefore think it most unlikely that US 10 year bond rates will rise by more than 2% from here, even if inflation starts to takes off (which I think will happen). Tightening of belts and a contracting economy tends to mitigate against inflationary trends. As a precaution, I have been looking at my investments to see the impact on profit of a 2% increase in interest rates. TCL has negligible impact in the early years due to hedging completely balancing the impact of interest rate rises.