Forget the Fed -- fix the budget

With markets unable to stand alone, everything depends on public policy

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The unsettling rise in long-term rates has stopped for the moment, economic optimism colliding today with a simply awful employment report for November.

The 10-year T-note has stalled just short of 3 percent (from 2.5 percent centerline, August to mid-November), and mortgages have risen almost to 4.75 percent.

Some aspects of this rate rise have made sense, one has not, and one is trouble.

The straight-line drop in the T-note from 3.99 percent on April 5 to 2.47 percent on Aug. 31 was overdue for a classic, technical, one-third countermove, and that’s what it’s done. As a matter of economic fundamentals, April-August was a time of double-dip expectation, but GDP has held the 2.5 percent area, and most data (all but housing) have shown some improvement. Third, the Fed’s QE2 caused more dumping of bonds than it is buying.