Ben Bernanke is about to treat the U.S bond market like a child on a sugar high. 

Since 2008, through “quantitative Easing,” the Fed has been adding liquidity into our economy by purchasing government paper and mortgage-backed securities, sending interest rates to near historical lows.  However, Bernanke and the Fed have recently yanked the pixie stick from the child’s grasp, stating that “tapering” of this “quantitative easing” program will likely occur toward the end of this year.   The agitated child, knowing the flow of sugar (liquidity) might end, is throwing an immense temper tantrum, as mortgage rates have increased over 1.25% in the last six weeks alone.  30 year fixed rates are now solidly in the mid 4’s, not mid 3’s, but still attractive, historically speaking.

We all know that as a child comes down off their sugar high, we’ll have heck to pay, but eventually, the behavior has a better chance of being healthy, grounded, and normalized.   Makes one wonder what things might have been like if the market had been given a granola bar to begin with……