Long-term rates stabilized this week as events, puzzles, forces and conflicts scattered all over the world canceled each other. We focus on the yields of long-term debt (like bonds and mortgage-backed securities) because they are the result of real-time voting on economic prospects. Belief in improved growth and its companion inflation push rates on long-term bonds and mortgages up. Poor or weakening prospects push them down. Political instability pushes down, relief pushes back up. We stabilized this week, but in a down pattern. The bond market has traded daily on Ukraine, but in a displaced way. For now, the risk of conflict there is remote to the rest of the world. But if Europe at last pulls up its socks and inflicts real sanctions on Russia, that will slow the whole world. When Europe makes courage noises, like the Cowardly Lion from the Wizard of Oz, rates go down. When Europe whimpers, markets relax, and rates go back up. In the background in Europe: the still-deteri...
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