Kit, Real inflation, of course, is MUCH higher than the govt's reported fairy tale. That is one reason for a partially inverted curve. The thirty year is still yielding more than the 10 year and the 10 year is yielding a little more than the 5. But the 2 year is getting hammered.
Part of it has to do with the impact of real inflation, which I mentioned above. But, also, if Dubya is President, he is going for a return to the Reagan deficits with a big tax cut for the 2% wealthiest people in the country. It won't pass, but bond traders worry anyway. So, with long bonds being supply constrained and some long term suckers thinking they'll never see rates this high again, it is even more constrained, longer term money isn't moving like the hotter short term stuff.
Also of interest, corporate America has been borrowing short to spend long for some time now, and that has an overflow impact on Treasuries. |
