Posts Tagged ‘us bond’
Forex Fundamental Analysis – US Bond Yields Highest Since Last June
Tuesday, March 30th, 2010US Bond Yields Highest Since Last June
US 10 year bond yields traded at the highest level since June 2009 reaching a yield of 3.94% last week. The credit crisis sent ten year bond yields to a record lows in December 2008 as investors sought safety in US treasuries and the Federal Reserve lowered the Fed funds rate to a record low. The worst of the credit crisis has passed and bond yields are rising. Are bond yields rising because of optimism about the US recovery or because of concern about rising US debt? The answer to this question may be crucial to the outlook for the USD.
The US government reported a record $221bln monthly budget deficit in February. February marked the 17th straight month that the US government has posted a deficit. The Obama administration is forecasting 1.56trln deficit for 2010. US government deficits are projected at 1trln or more through 2020. Last week the U.S. Congress passed a health reform bill. The estimated cost of the health reform bill is just under 1trln over the next 10 years with the CBO estimating that the reform bill could reduce US budget deficit by close to $200bln in the next decade. Many analysts are skeptical that the health reform bill will reduce the deficit and warn that the health care bill could cost more than the government estimate. This may partly explain why it might not have been a coincidence that US ten year yields hit their highest level since last June after the announcement of the passage of the health reform. Additional deficit concerns include report that the US Social Security administration will for the first time pay out more this year than it takes in and last week the Obama administration unveiled new measures to help the unemployed reduce their mortgage payments. The revamped mortgage plan will expand the administrations $75bln foreclosure relief effort but it’s not clear by how much.
