Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Finance - Investments
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions


Not looking for a job? Tell us about your ideal job,
and we'll only contact you when it opens up.
https://www.dwsimpson.com/register


Finance - Investments Sub-forum: Non-Actuarial Personal Finance/Investing

Reply
 
Thread Tools Search this Thread Display Modes
  #31  
Old 07-30-2009, 11:01 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

http://www.cnbc.com/id/32201716

Quote:
Weak Treasury Auctions Raise Worries About US Debt Burden
Published: Wednesday, 29 Jul 2009 | 4:55 PM ET
By: Reuters

The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government's burgeoning budget deficit.

It was the second lackluster showing in as many days, convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke and that Thursday's $28 billion seven-year offering could suffer a similar fate.

....
Demand for the five-year notes was below average, measured by the bid-to-cover ratio of 1.92, the lowest in almost a year.
....
Five-year notes fell in price and were last trading down 6/32, with the yield rising to a four-week high around 2.66 percent.

"It was pretty poor underwriting and there has to be some concern somewhere in the Treasury about the inability to underwrite the supply," said John Spinello, Treasury bond strategist at Jefferies & Co in New York. "It's a little disconcerting to the market. It creates a negative psychology before the seven-year notes to be bid on tomorrow."
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #32  
Old 08-26-2009, 08:04 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

China reducing its exposure to US debt
http://newledger.com/2009/08/china-t...-credit-cards/


Quote:
Government data released for June 2009 shows that China has begun to make good on it’s forecast to start reducing exposure to US government debt. This was not done for ideological or political reasons, as some may claim, but rather because of an honest risk vs. reward assessment and internal forces threatening to tear the rosy veneer from China’s economy.

In February of 2009, The People’s Republic of China (a communist country) once again broadcast to the world that they were growing increasingly uneasy with the amount of US treasuries they were buying and holding. At that point they owned more than $744.2 Billion in US government debt, with additional large holdings of private US debt in the form of corporate bonds. In an article published in Reuters. Luo Ping, director-general at the China Banking Regulatory Commission (a communist), broadcast the increasing discomfort China had with its mounting US debt.

“Except for U.S. Treasuries, what can you hold?” Luo was cited by the paper as saying. “Gold? You don’t hold Japanese government bonds or UK bonds. U.S. Treasuries are the safe haven. For everyone, including China, it is the only option.” In further remarks, Mr. Luo stated, “There will be no bottom-fishing of financial institutions, particularly in the U.S., because there is a lot of uncertainty about the quality of the books,” the paper quoted Luo as saying; “We hate you guys. Once you start issuing $1 trillion-$2 trillion… we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
....
In fact China is facing multiple huge financial dislocations of its own. In July the government failed to sell all 35 billion yuan in bonds up for sale, achieving only 25.1 billion yuan ($3.7 billion) sold. One could reasonably ask what China, with more than $2 trillion in currency reserves, is doing selling bonds into a market already flooded by the US desperately trying to fund their government bloat.


In truth, the opaque, communist Chinese managed economy is in worse shape than ours. The government has been desperate to put a shining golden face on what is quickly becoming an unmanageable situation. The bond sales in July that failed were part of a fund raising effort for China’s 586 billion multiyear “stimulus package”.
....
Which brings us back to China’s reduction in US debt holdings. The Chinese government clearly knows the game is nearly done, and is wisely starting to pull back its investments towards home soil. With it’s economy out of control and headed for an implosion; they need to repatriate money to keep some semblance of order once the wheels come off. Like so many households in the US, they are liquidating what they can to cover the costs of life now that the new reality has taken hold.

Will China mass-dump US treasuries when they hit the wall? Some political pundits have spread this thought around in the past, pointing to China as the evil schemer in the east. In reality China will always be the ultimate pragmatists, and may see the money parked in the US as a nest egg that will be used to prime their system once the financial storm has blown over. With China focusing on saving their own skin, days of free money from China are coming to a close.
The only beef I really have with this piece is the author and/or the editor have no clue how to use "its" as the possessive, not "it's".
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #33  
Old 09-04-2009, 08:24 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

Treasuries likely to default? [man, that will screw up my interest rate models....]

http://www.econlib.org/library/Colum...meltbills.html

Quote:
Almost everyone is aware that federal government spending in the United States is scheduled to skyrocket, primarily because of Social Security, Medicare, and Medicaid. Recent "stimulus" packages have accelerated the process. Only the naively optimistic actually believe that politicians will fully resolve this looming fiscal crisis with some judicious combination of tax hikes and program cuts. Many predict that, instead, the government will inflate its way out of this future bind, using Federal Reserve monetary expansion to fill the shortfall between outlays and receipts. But I believe, in contrast, that it is far more likely that the United States will be driven to an outright default on Treasury securities, openly reneging on the interest due on its formal debt and probably repudiating part of the principal.
....
Predicting an ultimate Treasury default is somewhat empty unless I can also say something about its timing. The financial structure of the U.S. government currently has two nominal firewalls. The first, between Treasury debt and unfunded liabilities, is provided by the trust funds of Social Security, Medicare, and other, smaller federal insurance programs. These give investors the illusion that the shaky fiscal status of social insurance has no direct effect on the government's formal debt. But according to the latest intermediate projections of the trustees, the Hospital Insurance (HI-Medicare Part A) trust fund will be out of money in 2017, whereas the Social Security (OASDI) trust funds will be empty by 2037.5 Although other parts of Medicare are already funded from general revenues, when HI and OASDI need to dip into general revenues, the first firewall is gone. If investors respond by requiring a risk premium on Treasuries, the unwinding could move very fast, much like the sudden collapse of the Soviet Union. Politicians will be unable to react. Obviously, this scenario is pure speculation, but I believe it offers some insight into the potential time frame.



The second financial firewall is between U.S. currency and government debt. It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government's money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.
....
Even conceding that federal taxes might rise rapidly enough to a level noticeably higher than during World War II overlooks an important consideration: All the social democracies are facing similar fiscal dilemmas at almost the same time. Pay-as-you go social insurance is just not sustainable over the long run, despite the higher tax rates in other welfare States. Even though the United States initiated social insurance later than most of these other welfare States, it has caught up with them because of the Medicare subsidy. In other words, the social-democratic welfare State will come to end, just as the socialist State came to an end. Socialism was doomed by the calculation problem identified by Ludwig Mises and Friedrich Hayek. Mises also argued that the mixed economy was unstable and that the dynamics of intervention would inevitably drive it towards socialism or laissez faire. But in this case, he was mistaken; a century of experience has taught us that the client-oriented, power-broker State is the gravity well toward which public choice drives both command and market economies. What will ultimately kill the welfare State is that its centerpiece, government-provided social insurance, is simultaneously above reproach and beyond salvation. Fully-funded systems could have survived, but politicians had little incentive to enact them, and much less incentive to impose the huge costs of converting from pay-as-you-go. Whether this inevitable collapse of social democracies will ultimately be a good or bad thing depends on what replaces them.
Ah, risk-free.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #34  
Old 09-04-2009, 11:57 AM
kazh's Avatar
kazh kazh is offline
Member
SOA AAA
 
Join Date: Nov 2001
Location: a long nap
Favorite beer: A & W Root
Posts: 5,044
Default

A T-rate watch seems less valuable than a longevity watch, unless money is your life. But it seems more immediately possible. Just program a device to get the daily e-mail from Treasury, and attach it to your wrist.

http://www.ustreas.gov/offices/domes...te/yield.shtml
__________________
awake again
Reply With Quote
  #35  
Old 09-07-2009, 09:26 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

Yeah, I've pretty much morphed this thread into China watch.

China not terribly pleased with monetizing of debt:
http://www.telegraph.co.uk/finance/e...-printing.html

Quote:
Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing".

"We hope there will be a change in monetary policy as soon as they have positive growth again," he said at the Ambrosetti Workshop, a policy gathering on Lake Como.

"If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.
....
Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.

"Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
....
Mr Cheng said the root cause of global imbalances is spending patterns in US (and UK) and China.

"The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

Yet the consequences are not symmetric.

"He who goes borrowing, goes sorrowing," said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #36  
Old 09-08-2009, 09:41 AM
WellThen WellThen is offline
Member
 
Join Date: Dec 2006
Posts: 2,356
Default

Quote:
Originally Posted by campbell View Post
Quote:
"The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

...

"He who goes borrowing, goes sorrowing," said Mr Cheng.

It was a quote from US founding father Benjamin Franklin.
It's unfortunate a whole country can go sorrowing due to a select few borrowing in their name.
Reply With Quote
  #37  
Old 09-11-2009, 09:04 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

Hmmmm.
http://www.bloomberg.com/apps/news?p...d=aFXIfkBlXuSI

Quote:
Sept. 10 (Bloomberg) -- Treasuries surged after a $12 billion sale of 30-year bonds drew the strongest demand since November 2007, the last of three auctions this week that each attracted more investors than forecast.

Thirty-year bonds rallied the most in almost six months as the debt drew a yield of 4.238 percent, the lowest level since March and below the 4.289 percent forecast in a Bloomberg News survey. Yesterday’s $20 billion 10-year sale also drew a lower- than-forecast yield. Demand at the $38 billion three-year offering on Sept. 8 was the strongest since November.
....
“This was a terrific auction for the Treasury,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, in a note to clients. “It’s a combination of a variety of factors. These include a lack of faith in economic recovery and the fact that the Treasury market is one of the few markets large enough and liquid enough to support the volume of liquidity dumped into the global economy.”

The difference between 2- and 30-year Treasury yields is at 331 basis points, about three times the historical average and up from 191 basis points at the end of 2008.
....
“The fluctuation of the dollar has a surprisingly small correlation with what goes on in the auction,” said Ian Lyngen, senior government bond strategist in Stamford, Connecticut at CRT Capital Group LLC. “It corresponds with the bid for stocks, so one could say that the U.S. has become relatively cheap on a foreign investment basis.”
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #38  
Old 09-15-2009, 02:07 PM
Aaron Brachowitz's Avatar
Aaron Brachowitz Aaron Brachowitz is offline
Member
 
Join Date: Sep 2001
Location: 41.629N, 93.833W
Posts: 10,004
Default

Weird -- the weekly 28-day bill auction today was for only $15 billion. It's been in the $30-40 billion range for a long time, months for sure, maybe longer (yes, this is my new hobby, monitoring treasury auctions). Demand was still north of $100 billion. Seems like whatever they don't borrow for 28 days they have to borrow for some other term (and at a higher interest rate). The other short-term auctions this week (13 & 26-week yesterday) were of normal size compared to recent auctions.

Edit -- I did a search on the Treasury website on 28-day auctions -- this is the smallest auction of 28-day bills since April of 2008, and the smallest in 2009 by quite a bit. Seems weird.

Last edited by Aaron Brachowitz; 09-15-2009 at 02:24 PM..
Reply With Quote
  #39  
Old 09-22-2009, 11:25 AM
Aaron Brachowitz's Avatar
Aaron Brachowitz Aaron Brachowitz is offline
Member
 
Join Date: Sep 2001
Location: 41.629N, 93.833W
Posts: 10,004
Default

Debt here! Come get your debt! Big sale today, everything must go.

4-week: $16 billion
52-week: $27 billion
2-year: $43 billion

Could be a one-day record? Don't know.
Reply With Quote
  #40  
Old 09-22-2009, 04:35 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,215
Blog Entries: 6
Default

...so they're pushing it from the short-term more to the long-term, now?
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Tags
interest rates, treasuries

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 09:20 PM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.58666 seconds with 10 queries