US politicians face formidable challenges putting the country’s public finances in order. One they have escaped is the sort of bond market pressure that has plagued eurozone governments over the past three years.
Thanks to the US Federal Reserve’s “quantitative easing”, now in its third round, Treasuries have extended a long-running rally. US equities dropped sharply last week as attention refocused on the fiscal cliff of automatic tax increases and spending cuts that, if not pre-empted, take effect from the start of next year. But bond yields, which move inversely to prices, have eased further. Washington, not markets, calls the shots – FT.com.