Fin - Breakout - US

Fear & Loathing in the Bond Market

Jeff Macke
Breakout

With an ongoing housing crisis, greater than 9% unemployment and the pandering, embarrassingly bipartisan braying jack-assery of a budget debate going on in Washington DC, it falls to Breakout to boost America's sense of smug self-satisfaction. Ready?

U.S. debt remains a relative safe-haven in the mind of bond investors. This is the message of from Scott Graham, Head of U.S. Government Bond Trading for BMO Capital Markets. As further evidenced by the U.S. Dollar's strength relative to the Euro, the rest of the world is taking the lead in the global race back into a crushing recession. It's a combination of symptoms that allows America to continue to fund an absurdly bloated deficit with cheap money despite the view of Graham and others that "rates should naturally be higher."

Of course there's nothing natural, at least in an economic sense, about the Government's behavior in the financial crisis. Graham summarizes those actions as the U.S. taking on bad loans, making them sovereign, then attempting to pass along the mess to the suckers buying our paper.

It's not exactly the Miracle on Ice in terms of a national pick-me-up, but it is a little sumpin' we can all cling to in these uncertain times. For those of you looking for other positive views of America's economic condition, I'd advise you not to watch the video. Graham is plenty amiable but he's a a bond trader. Bond traders don't trade on hope.

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