Ten-Year Note Trades Near 6%; If Taper Is For Real
I found this article over at our good friend Bob’s site, 321gold.com. The author, Michael Pento, is a well known fund manager and has some interesting theories on interest rates if the Fed does go through with some degree of tapering. Over the past 5 years there is no doubt that borrowing has increased and people, corporations, and the government all hold significantly more debt. This will prove to be very negative for all involved when rates start to rise.
Good point Tom. You are right taper can be used for both up and down however I think in this situation we all agree when the Fed says taper they are referring to tapering down.
Taper
1) diminish or reduce or cause to diminish or reduce in thickness toward one end.
2) a gradual decrease
Interesting point Tom
An increase in rates is also not built into the government’s projections on the deficit. As they start to pay much higher amounts to service the existing debt, the deficit could really start to build quickly again.
I think the government is paying very close attention to rates because any significant rise would have a severe impact on the country overall. The Fed will do whatever it takes to keep rates low which may mean more QE or simply one of the many other tools they have. It is a dangerous game they are playing but they have no choice.
We could and will eventually get to 6% on the 10 year note. But I think the Fed will throttle it along the way. To avoid redundancy, let me say my reasoning is posted under KER’s Commentary here today.
Here’s a great read on the budget deal:
The are two sides to a taper…I don’t like the word taper being used all the time to taper down…because you can taper up as well…they need to specify up or down.