Saturday, June 09, 2007

Bond Sell-off

As 10, 20 and 30 - year treasury prices go down, their yeild goes up, putting upward pressure on interest rates. Thus, reports Krishna Guha of Financial Times:

The spectacular sell-off in the US bond market this week is a macroeconomic event not just a financial market event, with consequences for the rate and composition of US growth and the conduct of monetary policy.

The sharp increase in yields on 10, 20 and 30-year Treasuries will push up mortgage rates and put renewed pressure on a still-weak housing market, with potential spill-over effects on US consumer spending.

In a second FT report, Richard Beales and Joanna Chung, describe how the rise in yeilds relate to expectations:

Investors sold bonds heavily on Thursday following growing concerns over rising interest rates and the sustainability of easy credit conditions.

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