investmentwatchblog.com / January 29th, 2013
Could U.S. debt be reaching a breaking point?
In the chart below of the U.S. 10-year Treasury, it looks like yields on U.S. bonds have bottomed out and are rising again.
There’s definitely selling pressure in U.S. bonds, otherwise the yields would not have risen 30% since last summer. (Imagine if the Federal Reserve was not buying $45.0 billion worth of U.S. Treasuries per month; a move that keeps prices artificially low, because demand appears so strong.)
Trouble could be brewing in the bond market. Why? If the Federal Reserve is buying so many billions of dollars in bonds each month, but the yield on the 10-year Treasury is rising, something is out of whack….
The agreement “may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem,” said Michael A. Peterson, president and COO of the Peterson Foundation.