Are U.S. Interest Rates Rising Too Much, Too Fast?

U.S. Treasury note yields have skyrocketed to a six-month high of 3.75 percent from record lows of 2.04 percent back in December. The surge in yields could threaten to derail the U.S. economic recovery. The fragile two month stock market rally here in the U.S. and abroad, may be dragged down by the weight of higher yields and higher borrowing costs for banks, corporations and the cash-strapped consumer. The U.S. Treasury has to sell roughly $2 trillion in new debt this year to finance the ballooning U.S. fiscal deficit. The only way to attract foreign investors to participate in the U.S. debt securities market is lower prices and higher yields along with the perceived safety of investing in U.S. debt. However, with the rise in yields, the U.S. Treasury runs the risk of driving off foreign central banks because of the massive amount of debt coming to market. Martin Weiss, president of Weiss Research Inc told

over seven percent from 1.2062 to 1.2370. Serious problems will arise if rates continue to climb at the current pace. The cost of borrowing will hurt the already fragile regional banks. If the availability of funds for the U.S. consumer to borrow tightens, the prospect of a robust economic recovery wanes. In the mean time, investors are rushing to an inverse Treasury EFT to position themselves for higher yields and lower prices. In a report put out by

on Friday, “We saw literally an explosion of call buyers in leveraged inverse product ProShares UltraShort 20+ Year Treasury Bond (TBT) as more than 100,000 call options exchanged hands,” Paul Weisbruch at Street One Financial said.