The Treasury Department’s recent proposals to give a short-term “fix” to the bond market…risks lowering the level of confidence for investors in the Treasury market in general over time. These “fixes” are actually raising the awareness of just how bad the fiscal situation is in the US. So, it could have the opposite effect of the one that is intended.
Sentiment in the bond market is becoming quite bearish, so we could indeed see a rebound (drop in yields) soon. The question is whether it can last very long or not.
If long-term interest rates are being “normalized”…then the same thing should take place for stock market valuations…..It’s nice to think that it’s different this time, but it’s hard to have one’s cake…and eat it too.
