Bonds continue to slide this afternoon as Senator Chuck Schumer of New York muses aloud that the “bad bank” proposal may cost between $1 and 4 trln. Then again, it might not, he adds, hopefully.
A tepid 5-year note auction, the $819 bln stimulus plan and trlns more to come for thge banks are helping push up bond yields. Tens no trade at a 1.26% yield. At some point, the firmer yields will be dollar supportive as interest rate differentials shrink. Right now, they stand at just 52 basis points between the US and Germany from 63 yesterday. Japanese investors may be tempted by a 147 bp pick up over Japanese government bonds.
