US credit spreads and the question of growth
Posted on 15 December 2010
When my favourite jazz station (that’d be WGBO) starts questioning the Fed’s strategy, it’s a sure sign that QE has gone mainstream. They simply asked why the Fed hasn’t mentioned their expectations for economic growth for the next year. It’s a fair question – and one that goes to the heart of the recent sell-off in Treasuries. If nothing else, it does demonstrate a growing mistrust for the institution.
Note that ‘corporate’ credit spreads have narrowed against Treasuries. Is this a sign that the economy is on the mend – with the attendant benefits to corporate credit? Or does it signal something else – that investors in Treasuries are getting scared of a government that shows no sign of taming its deficit? It could be both…
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