Former Federal Reserve Chairman Alan Greenspan’s warning that rising yields on government debt will drive up American borrowing costs is resonating with the world’s biggest bond traders, who say this month’s losses in the market for U.S. Treasuries are just the beginning.
Yields on 10-year notes, the benchmark for everything from mortgages to corporate bonds, climbed as high as 3.92 percent last week from a low of 3.53 percent in February.
The 18 primary dealers of U.S. debt forecast the rate will reach 4.2 percent this year, the highest since October 2008, according to the median estimate in a survey by Bloomberg News. Higher yields are the “canary in the mine,” Greenspan said in a March 26 interview. The increases reflect concern over “this huge overhang of federal debt which we have
never seen before,” he said.
Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” Greenspan said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”
Jason Murray
Fixed Income Portfolio Analytics
Sterne Agee
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