Re: This Bond Market Rally Has Everyone Scratching Their Heads
Ray, I agree with your reasoning, it makes sense on first blush, but who can explain the fact that deficits have been rising for 20 years, but interest rates have been falling for 20 years? Foreign entities (OPEC n' China) are FLUSH with cash and need to buy our debt. They also need US to consume what they manufacture. Its a symbiotic relationship like the shark and the pilot fish. If the Foreign bond holders stop buying our debt and interest rates rise, the value of their holdings drop. So even though our debt seems high, its manageable as long as there's no huge shock to the system.
|