The Biggest Borrower in the History of the Universe

I suppose it should be no surprise that yields on the treasury bonds are rising again, particularly on the long end of the curve. In the later part of 2008, we saw a panic in every other part of the market and a bubble in Treasuries that seemed to contradict the fundamentals. The US government was the running large deficits over the last few years, and all indications are that they will get even larger. With this massive supply of Treasuries, sooner or later the prices would have to fall as there is not limitless demand for US government's promises to pay.

While a technical default is not conceivable in my mind over the term of the long bond, investors realize that the probability of increasing inflation and the spectre of unfunded social security and healthcare obligations is very real. Even the Chinese might think that there has to be other places to put their dollars.