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Economic Review

1/11/2010

So what’s the real reason why longer dated Treasury yields rose over 50 basis points over the past couple of weeks?

After being caught in about a 20 basis point range over the past four months, yields on 10 Year Treasuries suddenly popped up to nearly their highest level over the past year.  Many analysts who are bullish on upcoming economic activity flapped their gums about the impending positive report that the unemployment release would produce last Friday, however much to their chagrin, the report was anemic, at best, and this was during a holiday season. 

So why then the sudden rise in the yields of longer dated Treasury maturities?  Is it the coming of an incredible boom in economic activity?  Stop the madness.  What you may have for the first time in a while are jitters from usual auction participants over the increased supply of paper hitting the streets along with the growing possibility of increased inflation in the pipeline due to massive liquidity injections and a weakening currency.  

If by chance you don’t agree with this position and still side on the cause of higher rates as being from an impending economic boom coming up, take a look at what’s happening in the UK.

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