As confidence increases in the stock market and a slew of other factors works against government debt, investors are unlikely to flock to Treasury bonds until yields get significantly higher.
The looming threat of inflation along with the tumble of the dollar and the unabated gush of government debt also are pushing bond prices lower, a move magnified Monday as stocks surged more than 2 percent and the price of Treasurys plunged.
That’s a trend that has held especially true for longer-dated debt. But regardless of the term, investors are eschewing bonds, posing significant problems for a government struggling to finance its multiple stimulus and bailout efforts.
“The reality is the Fed is totally out of control here and it’s causing all kinds of unintended consequences as a result or this monetization of US debt and the debasement of the US dollar,” says Mike Larson, analyst at Weiss Research. “The market’s going to extract it’s pound of flesh somewhere–whether that’s the currency market, the bond market, or if it’s some sort of tag-team.”
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