The continued rise in US Treasury yields is one of those classic good news/bad news scenarios. The good news is that investors are finding more productive uses of capital than mindlessly buying Treasury debt. The bad news is that mortgage rates are rising which could choke off the green shots of a housing recovery seen in the recent data.
Some say the rise in Treasury yields is more a function of undigestible levels of supply hitting a market where demand is limited. John Berry of Bloomberg begs to differ. Bill Gross of Pimco expects the Fed to allow rates to beack up ahead of $67 bln in Treasury auctions this week and then come in and start buying bonds if the market does not readily soak them up. It is a brave new world.
