How has fiscal cliff panic impacted US bond markets?

John Bellows, an investment strategy analyst at Legg Mason's fixed income subsidiary Western Asset Management, explains why fiscal policy is holding back corporate confidence in the US, and discusses the impact of the fiscal cliff on bond markets.

There is suggestive evidence that uncertainty about the election and fiscal policy has held back investment and hiring in recent months. The resolution of this uncertainty (in either direction) could increase corporate confidence, allowing businesses to make hiring and investment decisions that they have been putting off. There is a large amount of cash on corporate balance sheets that could be mobilised, should confidence increase. Given these political/regulatory/tax/healthcare uncertainties and their probable impact on recent growth, US treasuries have remained at lower yield level...