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Buzz and Banter



Conventional thinking and rhetoric has it that the substantial recent rise in interest rates is due to a strengthening economy. Just on CNBC a former under secretary for the treasury offered a quite different take on things, one that reflects much of the thinking here at Minyanville.

He very clearly expressed his belief that the underlying reason revolves around substantial and rising imbalances in the U.S. economy as it relates to the rest of the world. We have talked about the trade and current account imbalances, of the high public and private debt, and finally of the unparalleled printing of dollars. All these things make bond holders very nervous, especially when they are foreign holders that must eventually repatriate their capital.

The thirty year government bond is down around one and a half points today and agency spreads, which started the day narrowing, have now widened out as well. Maybe all is well and the economy will catch up with the stock market, but bonds may be sending quite a different signal than most believe.

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