Relevant and even prescient commentary on news, politics and the economy.

Fed Policy and Bond Yields

Update:  Charts and data after the read more. With the Fed completing a two day meeting and Bernanke holding a press conference today  it may be a good time to make a few comments about bond yields. In an open economy with a current account deficit the equilibrium interest rate is the one that attracts […]

Fear of China syndrome

I overheard a conversation at a local restaurant on the impact of the US being dependent on China buying US bonds to finance federal debt.  Usullay missing from such conversations is the % of money involved, whether that is a lot, and what effect it has on federal debt and trade (and some kind of […]


The current low level of long term interest rates is creating all types of debate about what it is suppose to signify and what investors are discounting. Maybe they are not signaling anything and it is just a return to normal for interest rates. For example, from 1871 to 1960 long Treasuries were below 4% […]

Simon Johnson…You Get What You Pay For

Simon Johnson comments on Standard and Poor’s irrational ratings: Standard & Poor’s downgrade of United States government debt last month has been much debated, but not enough attention has been devoted to the fact, reported last week by Bloomberg News, that it continues to rate securities based on subprime mortgages as AAA. In short, S.&P. […]

Goldbugs and inflation

by Mike Kimel Howard Hill on has been arguing with gold bugs: I know that some readers are going to say “Wait. The gold market is saying inflation, not deflation.” That’s not how I see it. I see the negative real rate on cash parked in T-bills (three month yield 0%, 12 month yield 0.08%) […]

Which country prints more and runs bigger government deficits: Canada or the US?

Even though Europe is on the forefront of global bond news these days, I’d like to revisit the US Treasury market. Specifically, I’ll look at the Canadian-US bond spreads, which tell an interesting tale of Fed purchases and US deficit fears. First, the Canadian over US government bond spreads for two longer term issues, 10yr […]


Many are talking about the bond market being the latest bubble. But it looks more like the press is just seeing bubbles everywhere. To me a bubble happens when everyone starts believing something that probably is not true. For example in the 1990’s investors started thinking that the long term earnings growth of the S&P […]

Tax expenditures, tax cuts, and IOUs (bonds)

We have seen the argument from some commission participants (Peterson for one) that Social Security is too expensive for those who need it and pay for it because it is an ‘entitlement’. We also have read from some Congress members (Senators Kyl and McConnel) that tax cut extensions of the Bush presidency are not deficit […]


Here are some charts to demonstrate what I was talking about. the recent drop in US bond yields has not been accompanied by a similar drop in European rates.Consequently the spread between US and foreign bonds has narrowed and it no longer compensates foreigners for the currency risk they take when investing in the US.The […]