Tags: Roubini | Bond | Vigilantes | target | US

Roubini: Bond Vigilantes May Have US in Crosshairs

Wednesday, 08 Dec 2010 09:32 AM

President Barack Obama's deal to extend the Bush-era tax cuts could have bond vigilantes — traders who demand higher yields on fears of deficit-related risks — targeting U.S. debt markets, says New York University Nouriel Roubini.

"Obama-GOP tax deal costs $900 billion over two years. U.S. kicking the can further down the road. Are bond vigilantes starting to wake up?" says Roubini on his Twitter account.

The White House and Republican leaders have agreed to extend tax cuts to all Americans, including the wealthy as well as extend unemployment benefits.

Both sides say the deal with spur economic recovery and lower unemployment rates, although some say the agreement threatens to widen an already gaping U.S. spending deficit.

Some say that while creditor nations such as China continue to willingly lend the U.S. money cheaply, the move won't hurt the U.S. economy, at least not in the short term.

Economic problems in Europe are focusing the world's attention on that side of the Atlantic, which gives the U.S. a little time out of the hot seat and keeping the dollar safe, says one Chinese Central Bank authority.

"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li Daokui, an academic member of China's central bank's monetary policy committee, tells Reuters.

"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."

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President Barack Obama's deal to extend the Bush-era tax cuts could have bond vigilantes traders who demand higher yields on fears of deficit-related risks targeting U.S. debt markets, says New York University Nouriel Roubini. Obama-GOP tax deal costs $900 billion...
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Wednesday, 08 Dec 2010 09:32 AM
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