How scary is it?
The Wall Street Journal reports:
Paul Krugman and Brad DeLong are not concerned, noting we've seen lots of yield changes of this size or higher in the past.
Even so, whether demand will continue to be there for burgeoning U.S. debt is obviously a question of great interest. Yields are now near the highest levels we've seen since the Lehman failure in September 2008, and if they continue to move up at their recent pace I wouldn't want to dismiss it as an irrelevant development.
One possibility that I think we can rule out is that recent bond moves signal renewed worries about inflation. The recent surge in yields on Treasury Inflation Protected Securities is just as dramatic.
Also, if the WSJ explanation was the right one, I would have expected the increase in interest rates to depress stock prices. But stock prices have been going up along with bond yields.
When bond yields and stock prices rise together, I would usually read that as a signal of rising investor optimism about future real economic activity. The February numbers for home sales and other indicators that we've been receiving most recently don't exactly support that thesis. Let's hope that investors are correctly anticipating that better news lies ahead.
http://www.econbrowser.com/
