Warren Buffett helps Interest Rates

Bond yields moved sharply higher today after news that Warren Buffett’s firm Berkshire Hathaway has offered to assume liability for the municipal bonds of troubled bond insurers. US Treasuries have been a safe haven for investors since last summer when the credit and mortgage markets began to experience serious setbacks. So any news, like today’s announcment by Warren Buffett, which is perceived as a partial solution to the nation’s credit market woes is likely to fuel a selloff out of Treasuries into other fixed-income securities. The increase in yields in US Treasuries then ripples through the banking and investing world increasing yields on investments tied to US Treasuries and loan rates tied to US Treasuries. Today’s yield on US Treasuries vs last week’s yields:

90-day: 2.19% vs 2.08%

180-day: 2.06% vs 2.00%

2-year: 1.99% vs 1.89%

5-year: 2.75% vs 2.63%

10-year: 3.70% vs 3.53%

If this trend were to continue we might see some better rates on mid-term and long-term deposit rates as banks reset vs current Treasury yields. Short-term rates are likely to stay low or go even lower as they are more likely to move lock-step with mvoes by the Federal Reserve.