Jerome Powell’s bond market “conundrum” makes Alan Greenspan’s back in 2005 look quaint by comparison. That was when then-Fed Chairman Greenspan was grappling with surprisingly low long-term bond yields despite his interest rate hikes. And despite concerns that government tax cuts might fuel inflation. Even so, U.S. borrowing costs edged lower, much to the Greenspan Fed’s chagrin. Yet current Fed chief Powell faces something even more confounding. At a moment when U.S. debt is careening toward $30 trillion, President Joe Biden is having remarkable success in getting vaccinations in arms and inflation is the highest since 2009, yields on Treasury securities remain oddly low. Rates on 10-year U.S. bonds are under 1.6%, compared with nearly 3% back in January. Many of the explanations why involve Asia, where central banks are particularly aggressive buyers of U.S. debt.

Poster Comment:

They are buying dollar denominated US Treasury debt to keep the dollar high in value so they can continue to sell stuff to Americans who can only buy with borrowed money. This will not last long.