aren't the higher treasury yields bad news for the us govt?
Good question, but there is no clear answer. Higher interest rates will definitely increase federal debt servicing costs, and outstanding federal debt is gigantic and likely to increase by at least $1 trillion this year. But to the extent that higher interest rates reflect a healthier economy, then the outlook for federal revenues improves at the same time that debt service costs rise. A stronger economy will have more workers earning more income and paying more taxes. Tough to say which of these will win out in the end.But let's say that the combination of these two forces will likely add to the federal government's financing burden (i.e., debt service costs will rise by more than the increase in tax revenues). I would argue that if this is the case, then that will add up to a powerful argument to reduce government spending. In the end, a reduction in spending in both nominal and relative terms (relative to GDP) would provide a real boost to growth, and that could be much more important than rising debt service costs.In other words, I do believe there is a growth-oriented solution to our current and potentially precarious fiscal mess.
The average maturity of the U.S. debtis around 5 years...Average interestrate is 2.3%....call when the 5 yearstarts to auction at 3% or higher
Yields are still so low, who cares. The Fed really needs to aggressive spur growth, probably through another QE program--although this is erroneously reported and then understood as a signal "the economy is weak."Prosperity is what the USA needs, a good long boom, without too much borrowing.The federal government needs to cut back agency spending and trim entitlements, while the Fed promotes growth by any means necessary. After a real estate bust and in a deep recession is not the time to fret about inflation. Precisely the opposite.
"If mortgage rates are headed higher, won't this slow or possibly halt the nascent housing market recovery? No,"I would agree with the above, in a normal recovery cycle, but this one is tepid at best..
Hans-People will buy real estate if they think the bottom has been reached. Sheesh, people were buying real estate like hotcakes in the 1980s at double digit interest rates. There could be an outright explosion on the upside n current real estate. We are very close to a large, sustained secular bull market in equities and property. Maybe a Romney Presidency, or some other positive (sensible federal budget, aggressive Fed) will do the trick.
Anyone been noticing even the Federal Funds rate has knocked upward lately? Would be *really* interesting to see what would happen if it started bumping up against the FOMC's 0.25% target.Federal Funds RateShort write-up with chartPlus an interesting write-up in the WSJ here.
Unknown:I wish people would drag out some charts of inflation and interest rates going back to the 1960s.Inflation and interest rates are just way, way low today. Dead.A bump up here to there hardly matters. I can remember when the WSJ told Volcker he was being too tight and that since 5 percent inflation had been reached (an improvement from double digits), it was time to loosen up. True story. 1984. Now we get hysteria when inflation looks like it might---might---go above 2 percent. Sheesh.Get a grip guys. Can we have some boom times first, and then worry about 3 percent inflation?
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