This post, as distinguished from the previous initial, longer post, will be a little more week-in-review like: Even so, it still relates to our spending, and where we go in the large picture, economically.
Last year, for almost every single week, the US was selling about $9B of bonds in the marketplace weekly. Last month, over a three day period, we sold something like $130B — a significant and troubling number for investors around the world. Any kind of large supply like that is going to find some of that number needing to find a higher rate, simply to sell it at the moment you want to. But surprisingly, the market absorbed this without too much change. However, in last week’s significant interest rate increase, what hit the market is the belief that we are being fiscally irresponsible. Too much, too long; and no end in sight.
Were there multiple factors involved? Perhaps; it is very complex. But coincidentally, this most significant increase in months, happened the day President Obama signed the Health Care Bill. Within two days, they shot up to around 3.91, and settled in around 3.85 — one of the most rapid rises in many months — on any news. To put this rate into perspective, that moved us globally below Spain, in the investment risk category. (And Spain and Portugal were big in discussion in the news last week as potentially being the next to follow Greece, in the potential defaulting on all their debt.)
Several days after that bill signing, AT&T took a one billion dollar write off — for the first three months of 2010. Clearly, US business is concerned that this is going to be expensive.
Now, this is not a political blog; but it is important to understand that, what the world’s investors believe, will impact us directly. Either way, one thing is for certain, like any household, we cannot spend like it doesn’t matter, and think that we can go on and sell our debt. We have to be fiscally prudent.
