Now raising intellectual capital
Bond market vigilantes — investors who punish profligate governments by pushing up their cost of borrowing — have been remarkably quiescent.
This week the U.S. government has broken all records for debt sales. Come Friday investors will have bought $115 billion of freshly minted Treasury paper, and given the huge scale of these auctions, investors have shown only modest signs of indigestion.
The Treasury might have had to pay more than it would have liked, but the yield on 10-year U.S. government bonds has risen only infinitesimally. So far there are few signs the surge in government borrowing is “crowding out” businesses coming to the market for cash.
Indeed the reason behind the willingness of investors to swallow huge amounts of Treasury debt at extremely low rates is not immediately apparent. It is also a little disappointing for political hacks anticipating the Schadenfreude of seeing the Obama administration being castigated by the markets.