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Bloomberg has a very interesting article today comparing how different the bond market is today vs. 16 years ago when Bill Clinton was president:

The bond market is giving President Barack Obama the green light to spend more money to boost the faltering economy.

While the government has increased the amount of marketable Treasuries by 70 percent to $8.18 trillion the past two years, rising demand has driven yields so low that interest to service the debt has fallen 17 percent so far in fiscal 2010 ending Sept. 30 from all of 2008.

Instead of punishing the Obama administration for running up a budget deficit the Congressional Budget Office said will total $1.34 trillion this year, bond investors are pouring money into fixed-income assets as inflation slows and equity markets stumble. That's a turnaround from 16 years ago, when Bill Clinton was forced to abandon stimulus plans after his advisers said the bond market would punish him with higher borrowing costs if it sensed swelling deficits.

The most striking figures, though are these:

The yield on the two-year Treasury fell a record 0.4542 percent on Aug. 24, the day the U.S. sold $37 billion of the securities. In 1994, two-year yields exceeded 7 percent. Yields on 10-year notes dropped to an 18-month low of 2.4158 percent on Aug. 25, from more than 8 percent 16 years ago.

So, there you have it, in a nutshell: the difference between then and now is a mere 6.5% - two year interest rates were 7 percent in '94 and are less than 1% now.

WOW!

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