In the past week some very interesting things have been happening in the bond market. The yield on the 10-year treasury, which was barely 2% near the end of last year, surged to 3.67% late last week. That in turn has pushed up long-term interest rates.
There are certainly many reasons for this, but probably the most basic is simple supply and demand. Our government is spending ENORMOUS (emphasis intentional) amounts of money to stimulate our economy. The problem is that we have to borrow the money to write these checks. The way we are doing this is by printing money to buy our own treasury bills.
The impact is that the bond auctions are being flooded, now add to that the fear of inflation and you have yourself a recipe for higher interest rates.
I am not an economist but based on what I see, I believe we have seen the low point of interest rates. Now may be the time for your business to lock in rates or refinance that balloon payment coming due.
« Family Business Challenge: Founderitis (Undervaluing 2nd Generation) | Main | Sales Tax Fraud: The Proverbial Second Set of Books »
June 02, 2009
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d835360fa069e201156fc3a794970c
Listed below are links to weblogs that reference Paying IOU’s with more IOU’s:
Comments
You can follow this conversation by subscribing to the comment feed for this post.
Verify your Comment
Previewing your Comment
This is only a preview. Your comment has not yet been posted.
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment
As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.
Having trouble reading this image? View an alternate.
.jpg)
.jpg){kind=logo}
WOO, look at this, my favorite subject...
I'll be posting on this later today but Kansas City Fed President Hoenig said today that the Fed will need to raise interest rates and fast if it is going to tackle the pending bond market implosion in time.
Remember all that stuff about "The Fed is prepared to address any inflationary concerns as they come" a few weeks back when this Treasury blow-out was announced?
Yeah. Obviously they are prepared, but will they take action? I don't think I am alone in believing the answer to that is no. They are "puzzled" by this action in the bond market! WHAT? This is OBVIOUS to economists and laymen alike!
Anyway, I'll rant on my *own* site, not yours. :) Great post - you may not be an economist but I think we can agree that these issues affect ALL of us, not just economists or even the accounting industry as a whole.
Posted by: Adrienne | June 03, 2009 at 04:08 PM