The deal will keep US debt higher for longer, and will be attacked on that basis.

THE US bond market tanked yesterday after President Barack Obama backed down and extended George Bush’s tax cuts for the rich for another two years, and shares failed to hold on to a rally. But Obama’s deal is nevertheless an important and potentially positive moment for the global market recovery.

The US bond market’s reaction – to trash bond prices and push benchmark 10-year T-bond yields up almost 0.25 percentage points to more than 3 per cent for the first time since last July – was academically correct.

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