Oh, yes, Obama has a legacy already.
For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.
....“The spotlight on Greece only helped to reveal that the US’s kitchen – with Federal and state budget balances – was itself full of cockroaches,” says William O’Donnell, strategist at RBS Securities.
Doyle's leaving a $multi-billion "structural deficit" AND the State will be facing enormous new Medicaid obligations due to ObamaCare.
And as mentioned earlier, Obama's new budget is truly mind-boggling in the fiscal sense, with some projecting US debt reaching up to NINETY percent of GDP.
Think otherwise? Then explain this:
The fact that German Bunds have outperformed both Treasuries and gilts in recent months highlights this increasing worry over public debt. Germany’s budget deficit is much lower than the US and UK and inflation there is also expected to remain low.
There's no wonder in my mind that some people are inclined to threaten congresscritters. I don't agree that such a course is productive--in fact, it is counter-productive--but the blithe disregard for fiscal reality shown by Obama and The Doylet certainly is cause for grave concern.
Yawn.
ReplyDeletehttp://finance.yahoo.com/echarts?s=%5ETNX#symbol=%5ETNX;range=2y
you might want to track the 10- year for longer than 10 days before drawing any conclusions.
Umnnhh...and the 5-year view shows a rapid decline in rates from 7/07 through 10/09, and a trendline going back UP from then forward.
ReplyDeleteNo surprise where the decline came from: FRB monetization of USdebt. (See down-spike ~10/09)
The question, however, is not JUST 'what's the rate,' but 'what's the rate compared to Germany, or Warren Buffet'?
"No surprise where the decline came from: FRB monetization of USdebt. (See down-spike ~10/09)"
ReplyDeleteThe decline in treasury yields most definately did NOT come primarily from Fed. monetization. We were in the grips of the financial crisis in which there was a HUGE flight to quality to U.S. treasuries of a magnitude the world has never seen before. I remember a point during the crisis where the 3 month T-Bill yield went negative. That's right, investors were willing to take negative yields just to hold U.S. short term paper. What drives this kind of move in bonds? One thing and one thing only. Fear.
Once it was apparent that Fed. monetization had managed to save the world from economic ruin, treasuries have bounced back almost to pre-crisis levels (about 4% on the 10 year). While this seems like a large number, you need to take a look at the 10-year over a longer period here:
http://finance.yahoo.com/echarts?s=%5ETNX#symbol=%5ETNX;range=
There NUMEROUS time periods where the 10 year popped 50 basis points over a 5 day period. Most are found in time periods when the economy is in "recovery" mode but unemployment remained high (look at March 2003 for example). The problem here is that people don't seem to understand that 4% yields on the 10-year bond are rather low historically. Will the 10-year move up even more than what was experienced this week? Probably. Especially if recovery seems more and more sustainable. Will we see 6% on the 10-year like Greece? It's pretty much insane to think so but I'm sure some idiot at the WSJ is writing an op-ed right now indicating otherwise.
"The question, however, is not JUST 'what's the rate,' but 'what's the rate compared to Germany, or Warren Buffet'?"
ReplyDeleteuh? No it's not. This is like saying that the question is not my 5% mortgage rate, but my 5% mortgage rate compared to my neighbor Dave's 4.8% mortgage rate. What the hell do I care whether or not Bob is paying more or less?
Quick clarification. We're not spiking to 6% in the next year. 6% is entirely possible in the long run.
ReplyDeleteThis is like saying that the question is not my 5% mortgage rate, but my 5% mortgage rate compared to my neighbor Dave's 4.8% mortgage rate.
ReplyDeleteBe serious.
Valuing the credit of the USA v. Germany is categorically different from valuing the credit of Sam and Dave.
What matters, in terms of U.S. government spending/debt service, is U.S. treasury rates. Period.
ReplyDelete