Does Debt Really Matter?

Has anyone looked at the U.S. debt lately? Well, the debt clock is now reading $15.5 trillion and climbing. By the end of 2012 U.S. debt should be over $16 trillion. Nobody in the media is talking about the national debt anymore. Perhaps these numbers do not really matter? All that seems to matter to the world is the stock price of Apple Inc's (NASDAQ:AAPL) which is over $500 billion this afternoon. The stock market has been booming higher since late December 2011 and this seems to have almost everyone in a good mode.

Today, U.S. Treasuries are falling off a cliff and this could be problematic in the near term. This means that yields are spiking higher on the 10 and 30 Year U.S. Treasuries. Traders can look at a chart of the iShares Barclays 20+ Year Treasury ETF (NYSEARCA:TLT) and see that it has declined lower by $2.83 to $111.07 a share. This tells us that the extremely low mortgage rates are about to increase. The low rates have helped many home owners refinance, and others to purchase homes at very low rates. If yields start to spike higher the mini housing boom could start to stall out. Even the iShares Barclays 7-10 Year Treasury ETF (NYSEARCA:IEF) is trading lower by $1.27 to $102.62 a share. It is important to note that most mortgages are closely tied to the 10 Year Treasury note.

Last night, the important Shanghai Index (China) sold off by 2.62 percent. What would happen to the bond market and the stock market if the Chinese start to sell U.S. Treasuries? It is rumored that China holds over $1 trillion in U.S. debt. The money that is coming out of the bond market is certainly not going into the stock market today. So where is all of this capital going this afternoon? Is it just sitting on the sidelines? Yesterday, President Obama had some harsh words for the Chinese government. Could the Chinese have taken offense to this statement by the U.S. leader? We shall see soon enough. In any case, yields look to be on the rise despite Operation Twist by the Federal Reserve. Perhaps debt does not matter today, but it will eventually.