Bond traders say stock traders are wrong, the Fed will not increase interest rates this year. [Bloomberg]

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  1. michaelgibbons says:

    So when are we going to “soak up the excess liquidity?”

  2. PencilSharp says:

    Hrm. Institutional traders will likely have a better idea on the Fed trends on interest rates, but I have to wonder:

    With monetization of the debt on the horizon (unless all that potential spending is rolled back by the 2011 Congress), just how long will lenders stand for low interest rates when inflation starts growing by leaps and bounds? I honestly doubt we’ll see Zimbabwean levels, but if Geithner is every bit the economidiot I think he is, we could see double-digits within the next two years.

    As the old Yiddish curse goes, “May you live in interesting times”…

  3. jstonemo says:

    They will raise rates this year, and you can take that to the bank!

    Well, maybe you wouldn’t want to do that, but you know what I mean.

  4. TEW says:

    The 10 year and 30 year T bill rates have gone up dramatically while the short term notes have dropped. To me it shows that people are worried about the ability to pay back the notes and the investors are flocking to the short term/ safer bonds. Also the rates will have to be raised just like they did during 1936 to avoid hyperinflation.

  5. Trai_Dep says:

    Considering how well the bond traders halted the run-up in prices associated with the real estate bubble – or not – I’d rely on bond sellers’ views of future performance less than I rely on my cat’s prospects of catching the swarm of humming birds that hoover out my window to vex him.
    The Treasury and the Fed will crank rates up once signs of real inflation occur. Something that they’re unable to do now since we’re still mired (or have nominally cleared) in a liquidity trap.
    They’re VERY cognizant of inflation and there are any number of reliable tools they can use to tamp it down, quickly and efficiently.
    Not so with what we’re in right now.