An interesting chart from the Business Insider of the results of a Morgan Stanley survey of 150 clients at a recent investment conference. Shockingly, more than 50% of the investors polled believe the US will experience a sovereign debt crisis by 2012.
This is the one issue that keeps us up most at night. The yield on the 10-year Treasury closed at 2.47% today, so clearly the market is not pricing this. We have written that the bond yield is not a reflection of fundamental value and is distorted by various technical factors. Policy makers must not be lulled into complacency thinking the low yields are a vote of confidence in fiscal policy.