loosecannon
Senior Member
- May 7, 2007
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http://www.google.com/hostednews/ap...HzGoUg?docId=7721d152f57f4475a1da3478e41b6b62Though stock investors initially cheered the tax deal in the U.S. as it boosted near-term U.S. economic growth projections, they are keeping a close watch on developments in the bond markets. U.S. Treasuries have moved sharply lower following Obama's compromise deal on the tax cuts — the yield on ten-year Treasuries is now standing at 3.22 percent, its highest level since late June.
The worry in the markets, echoed by credit ratings agency Moody's Investor Services, is that the tax cuts extension could add around $4 trillion to the U.S. deficit over the coming ten years compared to the scenario on which the Obama administration had based its projections.
Bond investors are worried there is no credible plan to get a grip on the U.S.'s own problems, especially as the pillars of the U.S. government are split.
"What Treasuries investors would like to see is a sign that someone in the Administration or the Congress takes the federal budget problem seriously," said Stephen Lewis, an economist at Monument Securities.
Look for the US Treasury's credit rating to be downgraded because of this tax cut and unemployment coverage extension.
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