Hi Everyone,

The 10 year treasury bond spiked this week after the government tried to sell billions in bonds.  The market is starting to ask for a higher return on the US debt, which means the markets perceives it as risikier.  Another interpretation is that the market is saying, stop spending all that money that you don’t have.  Anyway, this must have been a nice wake-up call the our government, as the Fed actually had to buy some of the Treasuries as there were not enough buyers, which means we “printed” money to buy our own debt.

A side effect on all this is that mortgage rates are closely related to the 10 year treasury bond, and so the 30 year fixed mortgage has spiked since Monday from just over 5% to 5.4%.  Our government will not like that, as they are very sensitive to that with their housing rescue strategy.

I personally think this all is very good news, as maybe the break is being put on on some of the spending by the federal government.  This might only be wishful thinking, but I do think this administration is sensitive enough on the consequences and just might come down earth with their outrageous spending proposals and resulting, economy choking tax increases to all of us.  At the end, the market is bigger and stronger the the federal government, even though it sure does not look like it now.

Cheers,

Patrick