“The bond market is often seen as the boring sibling to the stock market,” said Robin Wigglesworth. “I think that's completely wrong. It is the bedrock to the entire financial system.”
The Treasury wants to use short-term borrowing to finance the national debt. While short-term interest rates are usually lower than long-term rates, they’re also more volatile.
The kinds of investors buying bonds these days may trade in and out of the market faster, and they may flee if something goes wrong, says Greg Ip of the Wall Street Journal.
Wall Street had been betting that higher oil prices will cause inflation. Now oil prices are dropping, and the leading theory is that cheaper goods could overheat the economy.
Consumers now expect prices to rise 4.8% over the next year, up from 3.4% in February, and businesses and bond markets are signaling similar expectations.
