Treasury Will Soon Have to Pay More to Finance Growing Debt

Bond prices, which move inversely to yields, recovered a modest amount of ground in Thursday trading. But worries persisted that the continued influx of debt combined with soaring federal deficits and the enactment this week of the new health care reform will would put pressure on yields.

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David Zervos, head of fixed income strategy at Jefferies, said the weak auction was directly tied to worries about the health care plan and deficit spending and likely a sign of things to come.

“There a lot of concern about what happening on a fiscal basis.” McCarthy said on CNBC. “We have enormous budget deficiencies, and Congress and the administration really have done nothing to address that. In fact, the recent legislation on health care is going to increase our budget deficits by over a trillion dollars.”

Supply also will not be abated, as the government needs the auctions to continue to fund the deficit and plethora of entitlement and stimulus programs. [Read the full article]

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