Observed low Treasury rates do not signal weak vigilantes
U.S. Treasuries prices rose on Tuesday as U.S. stock market declines renewed the safe-haven bid for bonds despite nagging worries over a possible U.S. default that could slam the value of government debt.
Fears the government will run out of cash by Aug. 2 if lawmakers do not reach agreement in debt talks actually bolstered Treasuries as investors still looked at U.S. government debt as one of the lowest-risk investments out there.
This is, in fact, a very Keynesian point. Spanning doesn’t hold. Markets aren’t complete. Low rates on Treasury securities are signaling fear, not safety. The price of gold, and Swiss francs, are very high right now.