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Make Me Smart with Kai and Molly

Episode 114: Antitrust the process

May 21, 2019

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Treasury bonds more popular than ever

Nancy Marshall-Genzer Jul 22, 2010
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Kai Ryssdal: You mention U.S. government bonds and most people think of two things: That they’re a good place to earn slow but steady income. And that they’re a good place to be when the economy looks rough. Now think of this: Investors have recently been buying Treasuries like they’re going out of style. That brings us to another thing about these bonds: They’re often an indicator of the way the economy could go in. So does the bond market know something we don’t?

Marketplace’s Nancy Marshall Genzer reports.


Nancy Marshall Genzer: The rule on Wall Street has been, when investors start buying Treasury bonds in a big way, look out. They’re betting the economy could go sour. So, is that what’s happening now?

Mark Vitner says no. He’s senior economist at Wells Fargo. He says investors are just jittery, and they’re looking for safety in the arms of Uncle Sam.

Mark Vitner: Growth has weakened over the last few weeks from whatever it did in the second quarter, and people are now a little more concerned.

Recent readings on retail sales and housing, haven’t been so great. But economist Ellen Zentner of the Bank of Tokyo says there’s something else at play here: People are buying bonds as way of protecting themselves from the ups and downs of the stock market.

Ellen Zentner: As soon we wring volatility out of the financial markets, I think investors will realize corporate balance sheets look very good, they’re in good shape.

When the economy improves investors don’t need the safety of bonds. Conrad Dequadros is an economist at RDQ Economics. He doesn’t believe in the bond buyer barometer. He says it may have worked a decade ago, but it’s a little off these days, because foreigners are buying our bonds regardless of U.S. economic trends.

Conrad Dequadros: The fact that they are much more significant purchasers of Treasury securities makes the Treasury market less indicative of what investors believe the outlook for growth and inflation is.

So, no more following the bond buyers. Listen to economists Vitner, Zentner and Dequadros. They all expect the economy to keep growing.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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