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)

This Marketplace podcast is brought to you by Wealth Enhancement, who asks, how healthy is your financial plan? Does it need a second option? You'd get one before surgery. Isn't your financial health just as important?

Get a Wealth Blueprint at no cost. We'll check the pulse on your plan, share what you might be missing, and opportunities you could be taking advantage of. And determine whether your current advisors a quack. Learn more at wealthenhancement.com/build.

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 Kyle Rizdal. Monday to day 5, October. Good as it always is to 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 is 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 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 Wolf, 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 Wolf (2:40)

And that's occurring amid all of the noise and volatility that we're seeing both in oil 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 Financial, 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. Mortgage News Daily has the average 30-year mortgage at 7.61%. Stocks generally up today, technology in particular. We will have the details when we do the numbers.

Music Seems the first couple of three elements in the program today are very big picture macroeconomically inclined. Justin on bonds just now, Debris 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.

Joe Gagnon (4:59)

Higher US interest rates attract foreign savers because they say, oh, there's a higher rate of return in the United States.