The Bond Market Is Trying to Help

May 4th, 2012 at 12:50 pm

The yield on the 10-year Treasury is currently 1.88%, a three-month low.  This signals the following:

–the jobs report is being interpreted as another sign of a weak economy, leading investors to turn to safe T-bills versus volatile stocks.  This bids up the price of the bonds and lowers their yields;

–investors are not worried about inflation–they’re worried about growth;

–government debt is not crowding out private borrowing–that would show up as higher interest rates;

–the fact that borrowing is very cheap for the government right now is the market’s way of saying, “Please, borrow and stimulate!  This austerity stuff is killing us.”

–I’m not sure anyone is listening.


Source: Marketwatch

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5 comments in reply to "The Bond Market Is Trying to Help"

  1. Phil Perspective says:

    Mr. Bernstein:
    Did you ever point these facts out to Mr. Daley and Mr. Emanuel?

    • Brian Silver says:

      I don’t think Mr. Emanuel or Mr. Daley were the problem. The main obstacle was Mr. McConnell (Senator from Kentucky) and his GOP colleagues who declared that their #1 priority was to make Obama a one-term president. Obama got what he could in the way of stimulus spending but not many of the big investments in infrastructure that would put construction trades to work (hiways, tunnels, bridges, etc.).

  2. Dan F says:

    They guys on the MMT blogs have been saying that since the beginning of financial crisis.

    Also they have been very clear that the economy won’t be getting any better until we start seeing some serious fiscal spending.

  3. davesnyd says:

    Is there any chance– any chance at all– of something beneficial happening prior to the election?

    If the Republicans hold either House (assuming the President is reelected), is there any chance of something beneficial happening after the election?

    If Romney is elected, is it possible that he’ll realize he has to go Keynesian stimulative and get something through (presumably, Democrats won’t be as obstructionist as the Republicans are being)?

    Do I remember that either you or Paul K. calculated something like a 2-4% hit to the economy if all of the tax cuts sunset on Dec 31?

    To sum it up– what’s the chance that we’re not heading into an economic Armageddon? And if we are, what can we do about it?

  4. Fred Donaldson says:

    If interest rates are ridiculously low – for banks – and riculously high for some consumers – 30%+ (credit card, for example), the solution is not more lending to the poor, but less spread for the lenders.

    Lowering interest rates for the poor borrower, and raising interest rates for the middle class saver, would generate more current or future disposable income for both groups.