RDQ Economics: One step closer to a potential fiscal disaster


More on the cost of funding US gov't debt a bit later, but as they say below, the US has already lost its AAA ratings in the capital markets (where it really counts).  When Berkshire Hathaway is seen as less of a credit risk than the Federal Government, the market has the AAA loss already baked in.  It should take a while for the rating agencies to catch up. 

Also they foresee the ten year yields to reach 5% from their current yield of 3.9%, which would add over a point to the mortgage rate.  That plus the already downward trend spell bad news for the housing market. 

Via RDQ Economics

  • The Treasury auctions have gone very poorly this week and yields have risen sharply over the last three days.


  • Speculatively, we conjecture that the selloff might reflect a diminishment of the market’s appetite for U.S. sovereign risk as investors and traders watch developments in Europe.


  • Warren Buffett can borrow more cheaply than President Obama. Maybe this is all technical, but the passage of healthcare takes the U.S. one step closer to a potential fiscal disaster.


  • There are enough straws in the wind to leave us feeling very uneasy about the long end of the Treasury market and we are sticking to our forecast that ten-year yields will reach 5% by year end. Color us bearish.

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