May

10

One of the bigger surprises this year for me has been the rally in the bond market up some 7% on the long end. It appears as if the vigilantes will never ride again. Rather than the Fed as the cause, I would look to the Treasury. Related surprises are the federal deficit which has decreased sizeably from the peak several years, and spending, as bad as it is, has remained relatively flat. Massive new discoveries of energy reserves have helped to push down prices in commodities and boosted tax receipts. As the Fed unwinds its buying program apparently there are many others willing to step up.


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