Yields rise on QE2: are you worried?

Discussion in 'Business & Economics' started by BenTheMan, Nov 11, 2010.

  1. BenTheMan Dr. of Physics, Prof. of Love Valued Senior Member

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    http://online.wsj.com/article/BT-CO-20101110-714699.html
    http://www.reuters.com/article/idUSNYD00372720101110

    The yield of US government debt rose yesterday, on the heels of the fed's quantitative easing. Yield goes like the inverse of price, which means the price went down, which signals a falling demand.

    To be clear, this isn't particularly worrisome, or even unexpected, in and of itself. However, if the trend continues, the rate at which the US government issues debt will increase. Many of the calculations you see regarding the deficit in the future rely on specific assumptions about growth and interest rates, and rising yields on US debt is certainly one of the things that will affect the calculation.

    So what are your thoughts, sci?
     
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  3. S.A.M. uniquely dreadful Valued Senior Member

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    I think its too early to tell.
     
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  5. BenTheMan Dr. of Physics, Prof. of Love Valued Senior Member

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    Liquid markets (i.e. US treasuries) move pretty quickly.
     
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  7. joepistole Deacon Blues Valued Senior Member

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    Answer:

    1) No I am not worried.

    2) We have had this dicussion before. Interest rates will at some time start to rise. That is what happens when you have a growing economy. The reason rates are so low now is because aggregate demand is low.

    3) When interest rates start to rise you are going to see the bursting of the bond bubble. And a lot of average Joes and Janes are going to get creamed yet again...thinking that their bond investment portfoilos can never go down.
     
  8. Buffalo Roam Registered Senior Member

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    Demand is low because no one know how much money will cost under the Democrats new budget.

    (They didn't even attempt to introduce one before the election)

    No one knows what the tax rates are going to be because the Democrats don't have a budget.

    No one knows what the cost of doing business under Obama care is going to cost.
     
  9. joepistole Deacon Blues Valued Senior Member

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    Do you have any evidence to support your claims?
     
  10. Buffalo Roam Registered Senior Member

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    Yes, the fact that the Democrats haven't produced a budget.
     
  11. joepistole Deacon Blues Valued Senior Member

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    How is this different when Republicans failed to produce a budget? And what about the evidence to support you other claims, where is it?
     
  12. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Sorry to get here 10 days after the OP. I can't be sure of facts but recall and theory supports idea that the long 30 year bonds fell in price and the 10 year bonds went up in price as / when the FED said that and shorter maturity was where they would concentrate their buying.

    In general, I think most of the long term buying is as a secure (in face value) investment to off set long term obligations. I.e. an insurance company has good idea home may millions it must pay out in 2040 and does not really care what a dollar will buy then. People who are interested in that are not buying 30 bonds with the government's printing presses running 24/7 now.
     

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