Treasury yields - predicting recovery or disaster?
chart-us-treas.gifLow short term interest rates are supposed to be stimulative to the economy, so when the U.S. Treasury market shows a steep yield curve, (ie short term rates are lower than long term rates) it might suggest that economic growth lies ahead.
Right now, the difference between 2 and 10 year treasuries is the steepest on record.
But rather than pre-saging recovery, could this be related to the trend we highlighted earlier… that Beijing (and others) are so worried about Fed policy they are shifting all their treasury holdings to the short end?
One man has no doubt what it all means. Asia’s own Dr Doom, Marc Faber, (and he was Dr Doom a good two decades before Nouriel Roubini became famous) says Fed policy is driving the US towards disaster, and he is “100 percent sure that the U.S. will go into hyperinflation” approaching Zimbabwe levels.
Beat that, all you Doom wannabes!