Sovereign Debt Problem Returns to the US


US Treasury 5 and 10 year yields spiked by 14.8% and 10.1% respectively, ending the week at 0.8% and 1.82%, 3 month highs. It is interesting to note that whilst Spanish 10 year yields have fallen by 10%, post “Draghi Effect,” the US 10 Year has quietly jumped by over 20%.

The $7 Tr-trillion question of course is, “Are Yields marching higher in anticipation of a QE3 announcement by “Helicopter Ben” at the forthcoming Jackson Hole scrum down,” OR “Are investors starting to demand a higher compensation for the perceived risk of lending to Uncle Sam and their “Promise to Pay?”

Either way, this suggests that the cost of American mortgages are about to move substantially higher, increasing foreclosures, slowing the economy further….and on it goes!


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