Canary in the Coal Mine

Alan Greenspan was recently quoted as saying that the recent spike in U.S. Treasury Yields is equivalent to a, "canary in the mine". If the 10 year treasury yield goes over 4.00% and holds it may be a very bad sign for higher interest rates going forward. The Fed controls short term interest rates only. The market controls long term interest rates and if the bidders do not show up at the treasury auctions the government must increase the rates to intice buyers.

The rate on the 10 year treasury bill dictates interest rates for mortgages, business loans, etc. If that rate increases to say 5.50% (which is being projected for 2010 year end by Morgan Stanley) that would spell very bad news for the fragile recovery in the real estate market and may also push up the already sky high national unemployment rate well over 10%.