1. When everybody knows about a problem, it doesn't happen.
2. When everybody understands a problem, it gets solved fast.
I'm betting on 2.
* * * * * J B K * * * * *
San Francisco
The bond vigilantes are finally flexing their muscles. A long period of stability for the US government bond market showed signs of cracking this week as a lack of investor appetite for new debt sent the benchmark 10-year yield to its highest level since last June.
For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.
Chart: TreasuriesFalling inflation, rising unemployment, the housing market slump, the Federal Reserve's policies of a near zero overnight borrowing rate and its purchase of up to $1,700bn in bonds have all helped keep Treasury yields near historic lows.
But this week the mood shifted as yields for $118bn of new US debt were much higher than forecast, sparking overall selling of Treasuries. Sentiment also deteriorated in the UK bond market after the government's budget ahead of a general election expected in May failed to resolve doubts over future spending and debt reduction.
http://www.ft.com/cms/s/0/c51fbbce-3908-11df-8970-00144feabdc0.html
