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  #21  
Old 06-02-2009, 03:38 PM
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Originally Posted by campbell View Post
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Usually a steep yield curve precedes a period of decent growth, but several analysts suggest the current ten year sell-off is due to concerns about increased Treasury issuance to finance the deficit.
discuss
which one (or what else) do you think it implies?
how does this affect your day-to-day work?
how about your personal finances?

Last edited by 1695814; 06-02-2009 at 07:13 PM..
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  #22  
Old 06-03-2009, 03:28 PM
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Oh, I guess some in the Fed aren't terribly mystified by the yield curve steepness:
http://www.nytimes.com/2009/06/04/bu.../04fed.html?hp

Quote:
Investors in the bond markets, where the Treasury Department goes to raise money to keep the government running, are getting skeptical about the scale of Washington’s spending. The yields on Treasury notes have risen to their highest points in five months as investors who thronged to the safety of government debt begin to invest their money elsewhere.

“These increases appear to reflect concerns about large federal deficits but also other causes, including greater optimism about the economic outlook, a reversal of flight-to-quality flows, and technical factors related to the hedging of mortgage holdings,” Mr. Bernanke said.

But Mr. Bernanke made no mention of whether the Fed would increase its purchases of $300 billion worth of government securities. Such a move could help to push down interest rates on longer-term Treasury notes, but it could raise the prospects for inflation down the road.
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  #23  
Old 06-05-2009, 04:29 PM
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http://www.forbes.com/2009/06/05/tre...kets-gmac.html

Quote:
Yet many fret because Treasury yields keep moving higher. The 10-year Treasury bond paid a 3.83% yield Friday afternoon, up from 3.6% in the last week of May and a 52-week low of 2.07%. One worry is that higher yields on benchmark government bonds will translate into steeper borrowing costs for home buyers and businesses, besides making the U.S. government’s deficit spending more expensive.
....
In testimony to the House Budget Committee on Wednesday, Bernanke acknowledged that rising yields on Treasury notes reflected worries over government debt and admonished Congress to reign in spending. But rising yields, he said, also mark a reversal of the flight to safety by investors last year and optimism about the economy. (See "Bernanke: Curb The Borrowing Binge.")

A recent note from PNC’s investment strategy team puts it in perspective: The average 10-year Treasury yield has been 3.9% in the last two years and touched a high of 5.3% in June 2007. In other words, the current 3.8% yield is slightly under the recent average. Fear and uncertainty after Lehman Brothers ( LEHMQ - news - people ) collapsed in September drove investors into Treasury securities en masse. With the economy and countries looking more stable, Treasury yields are bound to rise.
http://latimesblogs.latimes.com/mone...other-blo.html

Quote:
The Treasury bond market is in cardiac arrest today over the May employment report: Yields are soaring, dealing another blow to investors who’ve been hiding out in government bonds -- and threatening another big jump in mortgage rates.
....
The net drop of 345,000 jobs last month was far smaller than the 520,000 that analysts, on average, had expected. Even though the unemployment rate rose to 9.4% from 8.9% in April because more people decided to look for work, many Treasury bond investors see the smaller job-loss figure as a sure sign that the recession is nearing its end.

And that raises the question of how soon the Federal Reserve will be forced to begin pulling back from its unprecedented easy-money policy.

The vast, vast majority of economists don’t believe the Fed would dare to tighten credit anytime soon. But bond traders reserve the right to be neurotic about the possibility.

In any case, with another huge auction of Treasury issues slated for next week, an upbeat employment report was the last thing the beleaguered bond market needed.
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  #24  
Old 06-08-2009, 08:40 AM
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Fed to flatten the curve? Raise short-term rates, buy long-term Treasuries...
http://www.reuters.com/article/GCA-C...5543KE20090605

Quote:
WASHINGTON (Reuters) - The Federal Reserve needs to be "anticipatory" and not wait too long to tighten monetary policy, Atlanta Fed President Dennis Lockhart said in an interview published on Friday.
....
Lockhart said that with rising market concerns about inflation, he could envision the Fed eventually raising U.S. benchmark interest rates while continuing to run an expansionary monetary policy.
....

Recent economic data suggest the economy may be stabilizing, raising some nervousness that the Fed's policies, if not pulled back soon, could sow the seeds of dangerous inflation.

The U.S. central bank could buy even more long-term securities in response to a jump in long-term bond yields, Lockhart said. The Fed in March announced it would buy up to $300 billion in longer-term Treasury securities to improve conditions in credit markets

....
Some market participants expect the Fed to expand those purchases to help tamp down bond yields, which jumped as high as 3.90 percent on Friday after the government reported a much smaller-than-expected drop in March payrolls, adding to signs economic decline may be slowing.
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  #25  
Old 06-10-2009, 07:55 PM
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http://acrossthecurve.com/?p=6220

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Tim Geithner invited a host of folks to 10 year note auction party and very few of the guests showed up.

The auction of $ 19 billion 10 year notes received a less than enthusiastic response from investors. I think we can say that investors responded with a rousing Bronx cheer to the offering.

At the time of the auction the issue was trading at 3.955 percent in the brokers market. The market clearing price was 3.99 which represents a tail of 3.5 basis points.

The market has collapsed since the release of the results. As best I can tell the issue has not breached the 4 percent level (yet).

The yield curve is steepening quite a bit in response.
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  #26  
Old 06-11-2009, 06:50 PM
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It's related, so I'm dumping it here -- from Laffer:
http://online.wsj.com/article/SB1244...ml#mod=djemWMP

Quote:
Get Ready for Inflation and Higher Interest Rates
The unprecedented expansion of the money supply could make the '70s look benign.

....
With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs -- such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid -- are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base -- which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash -- by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base -- which prior to the expansion had comprised 95% of the monetary base -- has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base. Yikes!
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  #27  
Old 06-17-2009, 11:55 AM
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China selling Treasuries:
http://www.breitbart.com/article.php...show_article=1

Quote:
A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.

The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.

"China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar," He Maochun, a political scientist at Tsinghua University, told the Global Times.

According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.
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  #28  
Old 06-18-2009, 05:14 PM
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Let's watch next week:
http://www.cnbc.com/id/31429270

Quote:
The Treasury announced Thursday a record $104 billion worth of bond auctions for next week, part of its herculean efforts to finance a rescue of the world's largest economy.

The sales will exceed the previous record of $101 billion set in auctions that took place in the last week of April and consist of two-year, five-year and seven-year securities. That record was matched by another $101 billion week in May.
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  #29  
Old 06-24-2009, 07:34 PM
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http://www.bloomberg.com/apps/news?p...d=aEAWXPUcE6Ww

Quote:
une 24 (Bloomberg) -- Treasuries fell for the first time in four days as the Federal Reserve kept the size of its asset- purchase programs unchanged, failing to ease concern that record government borrowing may lead to higher interest rates.

Yields rose the most on longer-maturity debt even as policy makers said inflation will remain “subdued for some time.” Fed Chairman Ben S. Bernanke has emphasized that the central bank can successfully take back more than $1 trillion it pumped into the U.S. banking system to pull the economy out of recession without stoking inflation.

“If there was a surprise, then maybe it was the fact that there was no mention of the exit strategy,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, one of 17 primary dealers that trade with the Fed. “That was a wild card.”

The 10-year note yield increased seven basis points, or 0.07 percentage point, to 3.70 percent at 4:32 p.m. in New York, according to BGCantor Market Data. The 3.125 percent security due May 2019 fell 17/32, or $5.31 per $1,000 face amount, to 95 9/32.

Two-year note yields rose 12 basis points to 1.21 percent. The 30-year bond slumped, pushing the yield up eight basis points to 4.44 percent.

“Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time,” the Federal Open Market Committee said in a statement after a two-day meeting in Washington where it also kept the benchmark interest rate between zero and 0.25 percent. The rate will stay at “exceptionally low levels” for an “extended period.”
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  #30  
Old 07-02-2009, 03:45 PM
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http://acrossthecurve.com/?p=6820

[typos fixed]
Quote:
Thus far this day the belly of the Treasury curve has been the big winner. The Long Bond has been the relative loser of the day.

The 2year/5year /30 year spread is 45 basis points. It began the day at 36 basis points.

The 5 year/30 year spread is 189 basis points and is about 7 basis points steeper on the day.

The 10 year/30 year spread is 84 basis points and is 4 basis points wider today.

The 2year/5 year spread trades in the mid 140s. it has retreated from record wide levels of 160 basis points in mid June.

....
My thought is that there truly is no chance that the Fed will tighten and that with supply on the way next week the curve should steepen dramatically to underwrite supply.
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