The yield on 10-year Treasuries fell to 1.64% from 1.75%. Bond prices, which move in the opposite direction of yields, were up. That's a big one-day move for the bond market, though Treasury prices are still well off their highs of the summer when yields fell all the way to 1.39%.
In some sense the bond market is a better gauge of whether Wall Street thinks Obama's policies will be good for the economy. The problem with bonds is that up doesn't always mean up.
It's true that at least in part Treasury bonds are rallying because some think the economy is more at risk of slipping back into recession under Obama than it would be if Mitt Romney had been elected. Recessions typically lead to lower interest rates, and higher bond prices.
Much of that thinking has to do with the fiscal cliff, the trillions of dollars of tax increases and spending cuts that are set to begin January 1st unless a deal is struck in Washington. Obama might be more likely to push us over the cliff, because he has said he will veto any deal that doesn't include tax increases for the rich, something the Republicans have sworn not to do. "The bond market feels better for itself," says Kevin Giddis, who heads the bond unit at Raymond James. "But it's probably for the wrong reason."
But what is also true is that the election, again in part, and how the bond market is reacting to the Obama win is a huge thumbs up for Federal Reserve Chairman Ben Bernanke. Indeed, the need to remove Bernanke oddly became a Republican primary talking point. Obama's re-election means Bernanke stays until the end of his term in 2014 and that his policies to stimulate the economy through low interest rates will probably continue even after that.
Some have argued that the Fed's quantitative easing, the policy of buying bonds to lower interest rates, will ultimately fail. They say all that bond buying will cause massive inflation. The result would be higher interest rates, a plunging dollar and a massive loss of wealth that sets the U.S. economy back for generations.
The Treasury rally suggests none of that will happen. Bernanke's policies may not produce a better economy overnight, but they're not likely to turn us into Greece either.
There are going to be people who don't like bonds. That was true before the election and will continue to be true after. And there are two scenarios that are bad for bonds. A new recession could cause the national debt to balloon even more, and that eventually could pop the bond market. Or two, the economy quickly recovers and that leads to higher interest rates, and lower bond prices.
What the market is saying is that Obama's policies are likely to head us down the middle path - a continued slow recovery. That's not as good as we want, but it's not bad news either.
What's in a name? Nothing, in the curious case of the $10 billion exchange megadeal unveiled Tuesday.
Frankfurt's Deutsche Boerse will acquire NYSE Euronext (NYX) in a deal that will give the German exchange's shareholders 60% of the combined company and 10 of 17 board seats. The new company will have headquarters in both New York and Frankfurt, and the exchanges will continue to operate under their own names in their home MOREColin Barr - Feb 15, 2011 11:18 AM ET
The money crowd just can't stop gushing about William Daley – but not, they stress, because he's a banker.
Daley is best known as son of the late Chicago mayor Richard Daley, brother of the current Chicago mayor of the same name and as a high-ranking Clinton administration trade official in the late 1990s. He is now a top associate of the nation's most powerful finance executive, JPMorgan Chase (JPM) chief MOREColin Barr - Jan 6, 2011 10:01 AM ET
For an outfit whose policies supposedly are plunging the world into unspeakable conflict, the Federal Reserve is doing an awful lot to avoid another meltdown.
The Fed said Tuesday it would extend the dollar swap lines it provides to central banks in Europe, Japan and Canada in a bid to avoid a cash crunch like the ones seen to such devastating effect in 2008.
The swap lines, under which the Fed provides MOREColin Barr - Dec 21, 2010 4:19 PM ET
Attention, savers: Ben Bernanke owes you $100 billion.
That's how much interest income Americans have foregone in the two years since the Federal Reserve slashed short-term interest rates to zero, according to one reading of the national personal income accounts.
As it happens, the inspiration for that analysis comes from a Fed economist, Kevin Kliesen of the Federal Reserve Bank of St. Louis. He tots up the pros and cons of the MOREColin Barr - Nov 3, 2010 6:55 AM ET
The government cleared the use of ethanol-rich gasoline in late-model cars and trucks.
The Environmental Protection Agency approved the sale of so-called E15 fuel – comprising 85% gasoline and 15% ethanol, which is made in this country largely from corn – for use in cars and trucks made since the 2007 model year.
The EPA said the decision clears the first step toward full-scale commercialization of E15 blends. Until now, ethanol MOREColin Barr - Oct 13, 2010 1:51 PM ET
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