Graham Walker: Hidden Costs of High U.S. Bond Yields

Sources close to "Graham Walker", the Asia-based money management firm

, believe that the recent surge in yields on the benchmark us 10yr bond is the harbinger of higher interest rates in the world's largest economy.

Whether or not interest rates are raised whilst the US economy is patently unable to withstand them is largely dependent upon how long investors are willing to invest in sovereign bonds issued by a debt-laden nation for next to nothing in terms of compensation for assuming the risk of doing so.

John Reynolds CEO at "Graham Walker" suggest that investors in the market for sovereign debt appear to be making the same mistakes that those who bought into the CDO and MBS time-bombs that caused the subprime tsunami in that they are mispricing risk.

The firm also believes that the recent furor over Greece's and Dubai's debt crises has focused attention on the potential for sovereign defaults in the months and years ahead.

Additional headwinds include investor concerns over the ability of the bond markets to absorb unprecedented levels of debt issuance especially now that the US Federal Reserve is no longer buying bonds or mortgage-backed securities. "Graham Walker" analysts theorize that, in order to continue to attract investors, nations may have to raise yields of the magnitude that will raise long term interest rates including mortgages.

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Graham Walker: Hidden Costs of High U.S. Bond Yields

By: Simon Miller

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