Opinion

The Great Debate

Bonds swamped in fair weather or foul

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Come good news or bad, the U.S. treasury market is taking a sell now and wait for inflation later strategy.

Since May 21, Treasuries have been battered, sending the yield on 10-year bonds up by nearly 40 basis points to 3.53 percent, an enormous move in bond market terms.

This is where the real action is, not in speculation about whether credit ratings agencies will cut the U.S. AAA rating in a year or two; by the time they get around to saying what everyone already knows is true, the damage will have been done.

The U.S. is in the process of reflating, really re-leveraging its economy, but this time using the public purse and printing machine to replace private demand.

Bond markets give stress test thumbs down

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The most revealing verdict on the results of the U.S. banking stress test was delivered not by shareholders but by the vigilantes of the bond market, who shunned an auction of 30-year government debt.

This makes sense: if the U.S. is letting banks off too lightly it will be taxpayers and the people who lend the U.S. money who will have to pick up the bill.

Bond market vigilantes saddle up

jimsaftcolumn– James Saft is a Reuters columnist. The opinions expressed are his own –

Efforts to reflate the economies of the U.S. and Britain are running into one potentially major problem; the bond market.

Appetite for government debt in recent sales has been very poor, raising the cost to the two governments of borrowing and blunting their efforts to bring down market interest rates by buying back their debt.

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