US Treasury interest rates, especially the 5,7, and 10 year flavors, continue to flail upward. Since my last post in mid-June, the net change has been:
5-year 1.36 +12bps
7-year 2.01 +25bps
10-year 2.63 +30bps
My guess is that the psychology of a rising stock market, bleating from the financial press about the danger of rising rates (and they have been rising), and the Fed's taper talk, has convinced some people to move their money out of bonds and into stocks. This move has gained momentum despite ongoing weak economic data. Housing has had a good year, but with rising rates and higher prices, it has been slowing down.
I think this psychology is temporary, but I don't know when it will be played out. A real spike in rates may happen when the world figures out that the large US trade deficit is permanent and that the US oil production increase is brief and temporary. Before that, I expect Japan to blow up in a huge financial fireball. They have been leading the world for a couple of decades and I believe their fate is the fate of all countries that follow, including the US.
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