Former Bank of England Policymaker Buiter Days Rates Will Rise; Shun Treasuries

Former Bank of England policymaker William Buiter says that investors should shun Treasuries because it is almost certain the US will have to raise rates next year. In an interview with Bloomberg Radio, he said:

"Rates will have to start rising, probably later in 2010, as inflation expectations medium and long term show up in higher long rates." He contined to say:

"Globally, interest rates are only going to go one way, and that is up. In the medium term, on a horizon of three to five years, there’s no doubt that the massive deficits and the temptation of government and central banks to finance these deficits with their money creation is going to put upward pressure on inflation."

Ten year Treasury Note yields are expected to rise to 3.82% next year from 3.47% today. Any rise in yields for new bonds pushes down the value of existing bonds, as investors are willing to pay less for bonds that pay a low interest rate.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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