But the yield spread collapses to lowest since early in the Financial Crisis. Even the Fed is worried.
US government bonds fell across the board on Friday. Yields rose and set a number of 10-year highs, in some cases ten years to the day.
Many people have pointed at the Senate where the prospects of the tax cut are said to have ‘brightened’ when the Senate approved a budget resolution. The tax cuts, if they make it, are said to lower government revenues by $1.5 trillion over 10 years. So maybe the bond market is starting to pay attention to government deficits and the national debt once again. But the bond market hasn’t paid attention in many, many years, and until the proof is in, I doubt it.
There are, however, other factors that predate Friday by many months. In fact, the moves in Treasury yields for maturities up to two years have been fairly consistent: yields have been surging.
This post was published at Wolf Street by Wolf Richter ‘ Oct 22, 2017.