If the supply of new U.S.Treasury securities keeps falling, we might see U.S. ten-year notes next to the Faberg eggs on display in the Forbes Galleries on New York's Fifth Avenue. I exaggerate, of course, but the dwindling supply of Treasury securities has become one of the biggest headaches in U.S. capital markets. Values are relative, and it's hard to price risky bonds if you don't have a stable benchmark against which to price them. A wobbly benchmark increases risk, reduces market efficiency and hurts growth. That's a harmful, if unintended, consequence of America's misguided obsession about reducing public debt. Be careful what you wish for.

Newly issued "on-the-run" long bonds, which banks and securities dealers use to adjust interest-rate exposure on a daily basis, are so scarce that the market will pay more for them than for older Treasury issues of the same maturity. "On-the-run" ten-year notes cost an extra one to two points. That is, they yield about 20 basis points less than older issues. Newly issued 30-year bonds yield 40 to 50 basis points less than a slightly older long bond.

Now 20 basis points may not sound like a lot. But it's a huge chunk of the 100-basis-point spread between a AA-rated ten-year corporate and ten-year Treasurys. Under ordinary circumstances, managing a corporate bond portfolio is like juggling a half-dozen oranges. Now it's like juggling the oranges on a ship's deck in a rolling ocean. Corporate bond issuers and investors jump around the yield curve depending on the vagaries of Treasury supply, rather than on fundamental economic considerations.

Swap rates are replacing Treasury yields as the benchmark for credit markets, as I reported in a recent column (see "Euro swaps and the Nile perch," Nov. 1). Trouble is, swap rates blow out whenever a systemic tremor passes through the capital markets. Last summer's Y2K scare sent the price of top-rated corporate bonds tumbling--not because credit conditions turned bad but because the swap market went into overload. It can't be good news for the economy when credit markets go haywire for reasons that have nothing to do with credit quality.

Three decades ago Robert Mundell, who just won the Nobel Prize in economics, showed that an increase in public debt can improve economic efficiency. Equity and credit markets have little trouble turning the expected earnings of corporations into capital, he explained, but it is difficult to capitalize the future earnings of households. Public debt turns the future taxes of individuals into capital and increases the efficiency of markets. For that matter, if a tax cut improves growth and reduces tax avoidance, the government bonds issued to cover the ensuing shortfall in revenues represent an addition to wealth.

This insight became the germ of what came to be known as "supply-side economics." Mundell was a generation ahead of Keynesian conventional wisdom. But he also was miles ahead of many of his University of Chicago colleagues, who were writing panegyrics to the "efficient market hypothesis" and "rational expectations."

Markets are never perfectly efficient, Mundell taught, because capital markets can't possibly capitalize all the economy's future income streams. We don't issue IPOs on our kid's lemonade stand. Even Internet startups go through several generations of sweat equity and venture capital before hitting the capital markets. In Mundell's framework, the point is to find ways to make imperfect markets more efficient.

Pricing business risk is the job of private capital markets. The job of government is to minimize systemic risks. It's your tough luck if you lose money on the stock exchange, but it's the government's job to make sure you aren't mugged on the way there. By the same token, governments shouldn't mug bond investors by inflating the currency, that is, by debasing the unit of account in which future claims are paid.

Governments also promote certainty in capital markets by providing a "well-funded public debt," as the U.S.' first Treasury secretary, Alexander Hamilton, argued in his "Report on the Public Debt." The optimal level of public debt is the one which best enables private investors to take risks on future business or household income.

Once again, policymakers--in America and other countries where public accounts are moving into surplus--are bickering about the wrong things. They still haven't caught up to the ideas Bob Mundell published in 1960.

新闻链接：http://www.forbes.com/global/1999/1129/0224084a.html