More grim dispatches from the US Treasury market. The WSJ runs today with a story on the popping of the Treasury bubble. Although the market is closed, there’s plenty of anticipation that with Obama signing another $800bn+ of taxpayers money away into the bailout ether, prices will continue to rise.
It’s not totally clear that this is an unwinding though. Prices on Friday actually fell quite sharply, and in spite of some jocular hatred animosity, the Chinese are still committed buyers. The Journal notes that indirect bids – a good proxy for offshore demand – in last week’s 10-year and 30-year auctions were well above average.
The point is that things are rather on a knife edge. There are naturally very real-economic implications for all of this – ones which the Fed will surely be troubled by. Calculated Risk makes a good point:
Rising yields will do nothing to tackle the root cause of the US’s economic distress: the collapsing housing market.
Related links:
Pop – FT Alphaville
To twist a Treasury – FT Alphaville