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When will the market say 'no more' to U.S. debt binge?

November 13, 2011 |  1:27 pm

Soaring interest rates on Italian government bonds over the last five weeks show how quickly the market can send a powerful message to debtor nations: You've borrowed enough.

So where is that market comeuppance for the U.S. Treasury, the world's single largest debtor, with nearly $15 trillion borrowed?

It now appears that the congressional "super committee" set up to rein-in the government's massive deficit spending could fail to arrive at an agreement by its Nov. 23 deadline.

Yet that seems unlikely to trigger a surge of selling in Treasury bonds that would drive up interest rates from their current near-record-low levels.

As I note in my weekend column in The Times, the U.S. is benefiting from Europe's unrelenting debt crisis by looking like the best house in a deteriorating neighborhood. And there are other factors as well that are likely to hold U.S. bond yields down for the time being.

From the column:

It's wrong to take comfort in the suffering of others.

But for millions of Americans who've sought refuge in bond investments since 2008, it's hard not to be appreciative of Europe's grinding financial crisis.

The threat of a meltdown across the Atlantic has kept money pouring into high-quality U.S. bonds, particularly Treasury issues, as a haven. That has held interest rates near generational lows since early August, in turn boosting the value of older bonds issued at higher rates.

Much of Europe, meanwhile, has faced just the opposite situation: Government bond yields have surged -- most recently in Italy -- as global investors continue to fear that the ultimate solution to the continent's debt debacle will be widespread defaults.

Yet many Americans also sense that Europe's woes are a warning. As total U.S. Treasury debt outstanding has mushroomed to nearly $15 trillion now from $10.6 trillion three years ago, a day of reckoning must be out there for Washington too.

Read the full column here.


Debt super committee well short of a deal

Obama urges super committee to 'get the job done'

Italian bond yields pull back, but fear still dogs Eurozone debt markets

-- Tom Petruno

Photo: The Treasury building in Washington. Credit: Brendan Smialowski / Bloomberg News