Fed Spin of the Day

This headline takes the cake for the most asinine headline I’ve seen today and is eerily reminiscent of Bush era GOP misdirection.

Fed Views Jump in Yields as Sign of Better Outlook (Update1)

Yeah I get the misguided logic on this one and see the Greenshooters jumping on the bandwagon here, but please try convincing a CEO of a debt hungry corporation to view the fact that his cost of debt capital is rising as a positive sign of things to come.

The harbinger of the near fail in the 30-year treasury auction last week and a steadily rising 10-year yield is certainly an indication that there are better opportunities out there than owning US Treasury Debt.  However I think it is a leap of faith to assume that this is a positive sign.  All equations have two sides, and all arguments have three.  In this equation the money fleeing treasuries could be flowing towards risk assets because they are once again in fashion, or they could be fleeing treasuries because treasuries are riskier than recent yields have offered compensation for (a.k.a. they have been overvalued).  The argument on the matter includes both sides of this equation and then of course the truth, which only takes its clothes off in hindsight.

Fed Views Jump in Yields as Sign of Better Outlook (Update1)

Scott Lanman and Steve Matthews, Bloomberg, May 13, 2009


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