Bond vigilantes – the term was coined by economist Ed Yardeni in the 1980s to describe major investors who demand higher yields to compensate for the perceived risks resulting from large deficits - could derail the country’s precarious recovery, some economists say.
Roubini, who has been dubbed Dr Doom since he accurately forecast the latest financial crisis, said on Twitter: “Obama-GOP tax deal costs $900 billion over two years. US kicking the can further down the road. Are bond vigilantes starting to wake up?”
Republican leaders and the White House agreed earlier this week to extend tax cuts on all income groups for two years and extend unemployment benefits in a deal which they hope will spur economic growth and cut unemployment.
Roubini is not alone in thinking the deal could worsen the US deficit and put the country at risk.
Rate went from 2.94% to 3.16% yesterday. Why are the bond guys up in arms? There's something that was left out of Obama's tax deal: support for Build America Bonds.
And without those, you will see rates go up, up, up. Republicans know damn well what they're doing here if they kill the BAB program. The bond market will tank and so will any chance of recovery.
They're totally fine with that, of course.
Congressional Republicans will block any inclusion of Build America Bonds, a taxable bond program popular with states, cities and other muni issuers, in the tax deal they clinched with President Barack Obama, a Republican aide said on Tuesday.
"We have a very firm line on BABs -- we are not going to allow them to be included," a congressional Republican aide said.
And without those, you will see rates go up, up, up. Republicans know damn well what they're doing here if they kill the BAB program. The bond market will tank and so will any chance of recovery.
They're totally fine with that, of course.
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