Monday, April 5, 2010

Interest Rates Climbing

The yield on the 10-year Treasury note, today, rose to its highest level since before the credit crisis erupted in late 2008.

The 10-year note yield is up to 3.98 percent, compared with 3.94 percent Friday.

Monday's yield was the highest since October 2008 when traded at 4 percent.

This my friends is the start of a very long journey.


  1. Wenzel, what do you mean by this being the start of a long journey?

  2. That rates are going to climb for a long, long time, years.

  3. Bob... isn't this game over for the Treasury's deficit financing game? Or do they move ALL the debt into the short end and let the long end float higher from here on out?

  4. Hang on a tick.

    You keep saying that M2 growth has slowed and this means a stronger dollar and therefore lower inflation. However, an increase in 10yr treasuries (because of rising inflation expectations) is incompatible with your 'stronger dollar' story. Is it not?

  5. It's completely in line. Right along, I have been forecasting higher interest rates, not necessarily because of inflation, though that will click in eventually, but because of the huge debt the government is raising AND the fact the Fed is not stepping in to buy it.

  6. Let me see if I understand. Are you saying that low growth in M2 is (partly) because the Fed has stopped purchasing US bonds? And with lower demand (from the Fed) combined with massive increases in bond issues, their prices are falling (yields rising)? Moreover, if the Fed steps in to buy up bonds again, this will be inflationary.

    I also note that oil prices have risen though this is being attributed to stronger world economic growth rather than movements in the USD. Would you agree?

  7. As far as the bonds and the Fed, correct.

    As far as oil and the dollar, the dollar has been strong against most currencies, so I would look at other factors.

    Oil is a very complex commodity. It can be a consumer commodity and a capital goods commodity. Although oil will lead an inflation higher, I would not look at it as an overall indicator of inflation. It can go up for other reasons.