The dollar is getting a boost from a huge back-up in US Treasury yields today as the government seeks to end the credit crisis once and for all. After sliding below 1.50% amid yesterday’s panic, 2-year notes are today above 2.0%, now at 2.06%. Part of the move is a normalization of yields after the government’s efforts to shore up banks while part is attributed to the expected massive increase of government borrowing to fund all these new outlays.
Conservatives will scream of moral hazard and government run amock while pragmatists will note that if a comprehensive approach was not taken, government outlays for unemployment insurance and other entitlement programs would probably dwarf the costs of the bailout.
Net-net, firmer yields and calmer markets should attract plenty of foreign capital to fund these needs and more.