A tale of two deficits

SPEAKER_1 (0:00)

Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? Introducing Odoo, the only business software you'll ever need. It's an all-in-one, fully integrated platform that makes your work easier, from CRM, accounting, inventory, e-commerce, and more. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. This is why over thousands of businesses have made the switch. So why not you?

Try Odoo for free at odoo.com. That's odoo.com.

SPEAKER_2 (0:30)

Support comes from WISE, the smart way to manage the currencies you need around the globe. Fed up with losing out to hidden fees when you send money abroad with your everyday bank? Choose the smart way. WISE. You can count on the exchange rate you'd usually find on Google. No unwelcome surprises. Plus ditch that where's my money feeling. Most transfers arrive in under 20 seconds. Join millions saving billions on hidden fees. Be smart. Get WISE. Download the WISE app today. T's and C's apply.

Kai Ryssdal (1:01)

I want you to think big picture today. Very big picture.

From American public media, this is Marketplace.

In Los Angeles, I'm Kai Ryssdal. Monday to day five, October. Good as it always is. Have you along, everybody. There is a relative paucity of economic data this week. We're going to get some consumer sentiment figures, some monthly trade data as well. More on that in just a second. But we thought we would start today with our new best friend, the bond market. The Treasury Department's going to auction off a new round of government debt over the next couple of days. And therein, as Marketplace's Justin Ho reports to get us going, will lie clues about our economic future.

Justin Ho (1:55)

A couple of weeks ago, the Treasury Department held an auction for two, five, and seven-year treasuries.

Winnie Caesar (2:01)

And those auctions did not go particularly well.

Justin Ho (2:04)

That's Winnie Caesar, head of strategy at Credit Sites. She says demand for treasuries was much weaker than expected. And Caesar says it's hard to pinpoint just one reason why.

Winnie Caesar (2:14)

I think that this year, for the rates market in the US., has been death by a thousand of paper cuts.

Justin Ho (2:21)

Those paper cuts include concerns about long-term government debt, higher energy prices, which cause inflation more broadly. Also, recent economic data that have been stronger than anticipated. Alex Wolff, global head of macro and fixed income strategy at JP Morgan, says investors are also unsure how the Federal Reserve is going to react to all of this.

Alex Wolff (2:40)

And that's occurring amid all the noise and volatility that we're seeing both in world prices and macro data. And it's creating, I think, a difficult environment for those participating in markets to know what is the right level of yields, where yields should be.

Justin Ho (2:53)

And in recent weeks, investors have been looking for higher yields than the government's been offering. Investors have those same concerns ahead of this week's 10 and 30 year treasury auctions. Chris Lowe, chief economist with FHN Financials, says today rates are higher across the board.

Chris Lowe (3:08)

And that's simply jitters about the upcoming auctions.

Justin Ho (3:12)

And Lowe says those jitters aren't just about the auctions themselves.

Chris Lowe (3:16)

What traders are telling you is that their primary concerns, inflation, excessive government spending, excessive government debt, all of those risks are going to remain in place.

Justin Ho (3:30)

Which means investors think interest rates are going to keep rising. I'm Justin Ho from Marketplace.

Kai Ryssdal (3:35)

Here's an interest rate of no small interest to a large slice of the American economy. The Mortgage News Daily has the average 30-year mortgage at 7.61%.

Stocks generally up to date, technology in particular. We will have the details when we do the numbers.

Seems the first couple of three elements in the program today are very big picture macroeconomically inclined. Justin on bonds just now, Sabri on the trade gap in a minute. Right now, though, Kaylee Wells on the dollar. The greenback is the strongest it's been in a year and a half. That is good news if you're planning to buy maybe a fancy new European car. It's good news if you're the US government, and you're hoping for more foreign investment. But the reasons the dollar's going up may be not such great news. Here's Kaylee.

Kaylee Wells (4:46)

Two big reasons the dollar's going up right now, says senior fellow Joe Gagno at the Peterson Institute for International Economics. One, the US government has a lot of debt, and that pushes up interest rates.