While low interest rates are designed to encourage consumers and businesses to borrow and invest (with little success) the policy has hurt millions of older and retired persons. With money market funds paying 0.10%, 5-yr Treasuries paying 1.0% and 10-yr Treasuries paying 2.0%, interest income has drastically fallen. These folks now eat out less, buy less and with inflation at 3.6% are seeing their real incomes rapidly decline.
Tag Archives: Treasury yields
Treasury Yields, Stay!
There seems to be widespread view that Treasury yields will rise sharply once QE2 is over since the captive market for bonds, the Federal Reserve, will be gone. Wrong, wrong, wrong! The only way Treasury yields will increase is if we have an accelerating economy (not), rising credit demands met by increases in bank lending (not) and heightened inflation risk (not).