Tax Breaks Hurt the Bond Market

Ok fianciers, Tory tax cutters, speculative investors, would be capitalists, here is what happens when you cut and cut and cut taxes for corporations. And no there is no trickle down effect. But there is an effect on the Bond Market and the price of the dollar.

Why are yields so low?

One puzzle that perplexed Wall Street through 2005 was the question of why long-term bond yields remained low even as the U.S. Federal Reserve Board kept raising short-term interest rates.

U.S. corporations tend to be awash in cash. With companies generating so much free cash flow, they don't need to borrow as much as usual. What will happen in 2006 if that free cash flow begins to deteriorate because companies have been spending less in recent years on expanding their businesses.

But with corporations hoarding capital (cash) and not investing it, opps I thought tax breaks meant they would invest back into their companies, and not borrowing, if the consumer financed U.S. growth bubble bursts that could spell
R E C E S S I O N.




Tags
economics
elections
Politics
Canada
Federal Election
Conservative
Liberal
Stephen Harper
tax cuts
bonds
USA
Wall Street