January 05, 2006

A Small Thought On Inversion

Rates have recently started to flatten and even started to invert. This means that it costs less to borrow money for the use of the US government for 10 years than it does to borrow it for 3 months. Considering our mammoth debt, why would we issue *any* short term paper at all? Why not just issue only 10 year notes or longer, pushing up the long rate with extra supply and lowering it on the short end with lower supply?

It's something of a puzzle.

Posted by TMLutas at January 5, 2006 03:20 PM