Greenspan Calls Rise in Treasury Yields ‘Canary in the Mine’
By Joshua Zumbrun
March 26 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates.
Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television.
“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.”
Ten-year Treasury notes were little changed at 9:47 a.m. in New York to yield 3.88 percent. The yield has risen 19 basis points in a week.
U.S. interest-rate swap spreads declined to the lowest levels on record this week, reflecting investor concerns about the ability of nations to finance rising fiscal deficits.
The rate to exchange floating- for fixed-interest payments for 10 years fell below the comparable-maturity Treasury yield for the first time on March 23. The swap spread reached as low as negative 10.19 basis points yesterday before reaching negative 7.63 basis points.
The U.S. budget deficit reached a record $1.4 trillion for the fiscal year that ended Sept. 30 amid falling tax revenue from the recession, a bailout of the banking and auto industries, and the $787 billion economic stimulus package.
No comments:
Post a Comment