So what happened on Wall Street in light of the good news? The Dow dropped 279 points. Why? Because the economy is going too well!
"Good news is bad news again," said Gina Martin Adams at Wells Fargo. Adams said there was a quick jump in the Fed Funds futures this morning. "The percentage chance for a June hike went from 18 percent to 25 percent," she said.Oh dear! You mean the Wall Street
Related to the good news and speculation on a forthcoming interest rate rise, the yield on the 10-year Treasury note has gone up to its highest levels of the year, closing at 2.24%. Keep an eye on this, as the multi-year stock market boom has been a beneficiary of low rates and export industries have benefitted from a relatively weak dollar. Both trends have changed in recent months, and while that was nice for me and my wife when we went to Mexico last week when it was 15 pesos to the dollar, but it's not so nice if you're trying to sell products overseas.
If that trend of higher interest rates continues, it could also have a significant impact on Wisconsin's finances, because Scott Walker's budget is balanced in no small part due to tens of millions of dollars in savings due to lower interest rates on borrowing, and it would increase the debt service on the $1.3 billion in borrowing that is projected for the state's road-building binge. Re-estimating debt payments is usually a quiet line item that comes out as the budget is debated later in the Spring, but given that the 10-year has risen from 1.78% to 2.24% in the 4 weeks since the budget was presented, it may be a sizable hit in a budget that can't afford one.
So bad enough that we're lagging the Obama Jobs Recovery in Wisconsin, and that we're cutting wages with the passage of (right-to) work-for-less, but the good U.S. economy might also make the hole in our deficit-ridden budget even larger. So Scotty, tell me again how it's working in Wisconsin?