Inflation and Deficits Don’t Dim the Appeal of U.S. Bonds
The New York Times
Treasury rates remain strikingly low, partly because of the safety government debt offers corporations and retirees. Whether that endures is crucial to federal spending.
Markets have been in upheaval. The Federal Reserve is taking steps to cool off the economy, as questions loom about the course of the recovery. And headlines are proclaiming that government bond yields are near two-year highs.
But the striking thing about bonds isn’t that yields — which influence interest rates throughout the economy — have risen. It’s that they remain so low.
In the past year, with consumer prices rising at a pace unseen since the early 1980s, a conventional presumption was that the demand for bonds would slump unless their yields were high enough to substantially offset inflation’s bite on investors’ portfolios.
