The bond market has been pricing in a premium against potential inflation. They've been looking at the numbers for some time and assuming that U.S. growth has consistently been strong enough to trigger inflation, and that is not a good thing for bonds.
More Quotes from Rob Palombi:
Gridlock leads to more debt reduction than either tax cuts or new spending. Because what we will be left with at the end of the day are larger surpluses.Rob Palombi
Greenspan's objective is to keep the U.S. economy expanding for as long a stretch as possible. That's why he's being so prudent in his speeches and that's why he'll adjust monetary policy to allow for that.
Rob Palombi
The underlying trend is one of strong consumption growth and strong spending -- not something the Fed is going to consider particularly positive. The Fed's series of interest rate increases have not yet been enough to significantly deter the consumer from spending.
Rob Palombi
What the Fed may do right now is prepare the market for a switch to a tightening policy from a neutral policy, and that may happen as soon as this month. There's always been the expectation that the economy would slow and ease labor market conditions, but that doesn't seem to be happening.
Rob Palombi
But it hasn't. The debt market expects Greenspan will achieve a soft landing, which means corporate earnings aren't going to crash and the outlook for corporate borrowers remains positive. That's driven yields lower, which in turn has kept borrowing costs lower for companies.
Rob Palombi
It's always been a contentious issue, though both the Ministry of Finance and the Bank of Canada, for the record, have said they're against a common currency. I think over a very long time you'll see an amalgamation of currencies, but that's a very long way away.
Rob Palombi
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