Our end of year forecast for the 10 year treasury to close the year at 3.25% is looking more and more to be too high.
It is interesting that no matter what the economic news is rates either hold steady or fall. We checked and saw the FED let $30 billion run off the balance sheet last week so with reduced FED demand other global buyers are stepping up to buy the treasury paper.
It is amazing to me that global buyers are continuing to buy U.S. bonds for the ‘safety’. It is scary to think that the U.S. is the best risk in a world–but it is what it is.
One day–someday–all of this will come home to roost. In spite of a pretty good economy the U.S. ran a deficit of about $80 billion in July alone–with corporate taxes being $55 billion lower than a year ago July. Projections are for over a trillion in deficits for each of the next couple of years. Our progress toward becoming ‘Greece’ continues.
REMEMBER–deficits don’t matter to bond buyers–UNTIL THEY DO. No bells or whistles will sound — it will just happen. We will go to bed with the 10 year treasury at 2.9% and wake up and find it at 3.5% and panic will ensue.