Sunday, May 31, 2009

More Hot Bond Vigilante Action

And it certainly appears to have gotten Ben Bernanke's knickers in a twist. If our choices for the steepening yield curve (the differential between long and short term interest rates) is boiled down to a) recovery; b) investor fear of dollar deterioration due to the mounting Obama deficits and debt and the monetization of the same, or c) Chinese investor fear of dollar deterioration, I'm thinking that the smart money's on b) & c).

Faced with the need to finance trillions more in deficits, without even counting the bankrupting government takeover of health care, capital is reluctant to invest in Treasuries when there are safer alternatives.

One can only wonder if the screwing of the Chrysler and GM bondholders isn't playing a role in all of this. Once you develop a reputation that suggests that savers and investors are just schmucks to be fleeced to benefit your politically connected friends...