The Federal Reserve is the biggest buyer of 10 year treasury bills currently yielding 2.6%. Does the Fed care what the yield on the 10 year is? Absolutely not. They buy treasuries with free money.
During the 1980"s the interest rate on 10 year's under Volker reached a record high point of over 15%. So a 2.6% interest rate today represents an extremely low yield. Most market watchers only think about the Fed's purchases of newly issued treasury debt. Almost forgotten is the gargantuan amounts of debt that must be rolled over. The total debt issued by the U.S. on balance must be totally rolled over "on average" during a time span of less than 5 years. So here's the big issue aside from all the new deficit spending that must be financed. What investor is going to roll over their 10 year treasury bonds (and longer dated bonds) which are now maturing? Ten years ago that debt was issued at an interest rate of over 4%. How many of those investors (foreign countries) will agree to roll over their treasuries to secure an investment return of 40% less than before (now at 2.6%). Something tells me there is a lurking demon in the reserve calculations of most creditor nations. Why would they roll over this debt? If they were the least bit financially savvy, they would cash in their treasuries and buy SLW stock, or silver,...or gold.
The transition to value, to things physical rather than based upon faith, is about to begin. Fiat and sovereign debt....are about to become toast!
They'll roll over to whatever is available, because the judgement call is based on what is investment worthy then, compared to the world competition. Your "worry" would be meaningful if after the great rate reduction of 15% overnight in 1980 got reduced to 7% by 1986, the number of bonds and return offered would have made a difference.
They rolled. and continue to roll, based on the competition of the time, not the old news and interest rates offered back in the day.
When the "Govt" retires and burns old , tattered, faded fiat money and pulls it from the system, do they replace it with new crisp bills? Yes
Do we know for a fact it's replaced dollar for dollar?
I mean, really?
The Govt. prints and issues debt obligations called Treasury bills.
The world buys them.
But during QE, they issued more debt and THEY are the majority owner and purchase most of this new stuff.
When they stop buying,or start tapering, who's to say what they do with some of this "debt".?
The perception of tapering has caused I rates to pop 100 BPs.
The actual tapering may not cause a pimple to pop.