Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis.
Bond investors are gaining confidence that Federal Reserve Chairman Ben S. Bernanke will unwind the central bank’s unprecedented $3.3 trillion balance sheet without sparking a crash similar to 1994, when Alan Greenspan surprised the market by doubling benchmark lending rates in 12 months.
For all the handwringing over the slowdown in the U.S. economy, the bond market shows there’s less risk of deflation now than before the Federal Reserve’s first two rounds of large-scale debt purchases.
Goldman Sachs Group Inc., which survived the subprime mortgage crisis by making bets on a housing decline, is raising money for a new fund that will buy home-loan bonds to benefit from an improving real-estate market.
The Federal Reserve said the economy maintained its expansion in all 12 of its regions as manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices. Christina Romer, former head of President Barack Obama's Council of Economic Advisers and Michael Materasso of Templeton Investments comment on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
Timothy F. Geithner, who took over the Treasury Department in the midst of the worst financial crisis since the Great Depression and oversaw the almost doubling of U.S. public debt, has done better for investors than Robert Rubin while falling short of Henry Paulson.