So a two-yearbank CD or a Treasuryinflation-protected security yielding around 2%, andshort-terminvestment-gradebondfundsat 2% plus, aren't the end of the world.
If banks and investment firms can't use Treasurys and Treasury derivatives like bond futures to tame their balance sheets, their lending to the private sector will be curtailed or priced upward.
Despite the rather dour comments from Lockhart, the tide appears to be shifting in the corporate bond market as liquidity has begun to return and both investment-grade and high-yield premiums over Treasury yields have begun to narrow in recent sessions.