Treasuries With A Twist

Inflation has remained at 3% for the past three years, but bond traders are convinced that won't last. Fearing that a price surge lurks around the corner, the credit market is demanding a hefty five-percentage-point premium on long-term government bonds. That has sent Treasury yields above 8% and become a source of mounting frustration for the Clinton Administration. Confident that inflation is well in check, it frets that high bond yields will slow economic growth and drive up the government's cost of borrowing even further.

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