Can Bernanke Avoid a Meltdown in the Bond Market?

bee

Bloomberg article by Jim O'Neil:

"The past few weeks have given us a hint of what might happen when the Federal Reserve starts to reverse its super-easy monetary policy. Expect turbulence in financial markets, especially for assets that have moved far above normal or reasonable valuations.

A return to normality eventually implies a benchmark 10-year Treasury yield of 4 percent or more. It won’t happen all at once, but that’s where we’re heading. With yields at roughly 2.2 percent, there’s a long way to go. This transition will mark a recovery of the equity culture and the cooling of investors’ protracted love affair with bonds. "

can-bernanke-avoid-a-meltdown-in-the-bond-market

Charles

Thanks Bee. I certainly hope so, just seems hard to avoid inevitable. Maybe baby steps? Like Marx and Engels...one generation at a time.

hank

I think he'll just leave and take some easy professorship somewhere before the jello strikes the blades.

Old_Joe

Reply to @hank: Not sure what might be worse- Bernanke stays and at some point starts the 12-step program to wean the US off of the drugs; or, Bernanke goes, and who knows what the hell happens then? All very well to say Yellin will be OK, but I seriously can't see Yellin getting through Senate confirmation. What then??

hank

Hey OJ - You nailed it. There will be bloodletting. Brings to mind John McCain's remark in support of Greenspan a decade ago:

"If he's alive or dead it doesn't matter. If he's dead, just prop him up and put some dark glasses on him like, like 'Weekend at Bernie's.' "

BTW - I'd guess Geithner, as he seems to have friends on both sides - but the opposition will be hot. Larry Summers would like it too - but has ruffled too many feathers (though more than qualified). Really will depend on where the country is politically at the time.