Insights

When bond markets move like this there is always a scramble to identify exactly why. Sometimes it can be obvious, like when yields begin to run just after an employment figure is released. But this time, it was less than obvious.

Last Wednesday brought a wonderful data dump by the Fed as they complied with a congressional order to release the recipients of TARP funds. The website ProPublica provides a list of the recipients of these funds as well as the funds provided to Fannie and Freddie.

Contrary to popular opinion, the savings rate has not been negative in recent decades. Though many would have you believe Americans are soullessly irresponsible consumers...

Leaving aside all the bluster regarding QE2 for a moment, I thought we might explore something closer to our hearts: short-term bond supply.

By now you must be sick of hearing about QE2, the latest QE or quantitative easing effort to come out of the Fed. But at the risk of encouraging you to stop reading here, I feel the need to add one more perspective to last week's action and I promise to be brief.

It seems the market is all geared up for action with short-term rates rallying some 20 basis points since talk of such activity began in earnest. Not only that, but 10-year Treasuries have fallen about the same. Even the rate at which Fannie Mae and Freddie Mac will make loans has hit an all-time low near an astounding 3.5 percent. ("If you qualify," of course!)

Relativity can be a difficult concept. There are many that believe the dollar is going down, the euro is going down, and the pound is destined to drop.  The yen is the only developed currency that stands to gain, it seems.

Just when we all thought rates couldn’t get any lower, they did. As we entered the third quarter, fears of European debt problems both at the government and banking level consumed the marketplace. Government spending’s chickens, it seems, were coming home to roost.