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



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

Reply
 
Thread Tools Search this Thread Display Modes
  #51  
Old 12-10-2009, 06:51 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: 83,236
Blog Entries: 6
Default

This certainly should be fun:
http://www.bloomberg.com/apps/news?p...d=av16pDNNrMig

Quote:
Moody’s Investors Service said the top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because public finances are worsening in the wake of the global financial crisis.

“The deterioration has been pretty severe,” said Pierre Cailleteau, managing director of sovereign risk at Moody’s, in a Bloomberg Television interview in London. “We expect a pretty strong policy response in the next couple of years in order to keep the debt in the Aaa range. We expect them to bend but not to break.”

The U.S. and U.K. have “resilient” Aaa ratings, as opposed to the “resistant” top ratings of Canada, Germany and France, Moody’s analysts led by Cailleteau said in a report today. None of the top-rated countries is “vulnerable,” or have public finances that are “stretched beyond the point of ‘no return’ to the Aaa category,” New York-based Moody’s said.

The U.S.’s debt burden will climb to 97.5 percent of gross domestic product next year from 87.4 percent, the Organization for Economic Cooperation and Development forecast in June. National debt in the U.S. climbed to $7.17 trillion in November. The U.K.’s public debt will swell to 89.3 percent of the economy in 2010 from 75.3 percent this year, according to the OECD.

“There has been a huge increase in debt-to-gross-domestic- product ratios as a result of the crisis,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “It’s right that there should be a lot of attention and pressure on these numbers.”

hmmmm
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #52  
Old 12-10-2009, 08:53 AM
WellThen WellThen is offline
Member
 
Join Date: Dec 2006
Posts: 2,356
Default

If I was a representative of either country, I'd bring up Moody's testing the boundaries of (and crossing them) credibility in Moody's debt ratings.
Reply With Quote
  #53  
Old 12-10-2009, 05:24 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

Quote:
Originally Posted by campbell View Post
This certainly should be fun:
http://www.bloomberg.com/apps/news?p...d=av16pDNNrMig




hmmmm
The market will probably downgrade US debt well before Moody's ever does (I just went into a "short" fund on long Treasuries, for example). Is it really conceivable that a Moody's downgrade would trigger some big selloff, as if investors would be totally shocked?
Reply With Quote
  #54  
Old 03-09-2010, 05:28 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

Does the Fed directly buy US Treasury debt as opposed to buying it on the secondary market? I thought this was illegal, but I look at the Treasury sale announcements and see the buyers listed as Competitive, Noncompetitive, FIMA, and SOMA. Look at today's 4-week auction, for instance -- $6 billion out of $37 billion total is for SOMA:

http://www.treasurydirect.gov/instit...20100309_2.pdf

SOMA stands for "System Open Market Operations" which according to the Fed website means:

Quote:
The System Open Market Account consists of the Federal Reserve's domestic and foreign portfolios, in addition to reciprocal currency arrangements made with foreign official institutions.

The Federal Open Market Committee (FOMC) has designated the Federal Reserve Bank of New York to execute open market transactions on behalf of the entire Federal Reserve System. The resulting investments are held in the SOMA portfolio.
So is buying a Treasury bill fresh off the press really an "open market operation?" And the weird thing is, the SOMA purchases don't seem to show up in the published schedules of federal debt. Why wouldn't they? They have to be paid back, don't they? The Fed might loan it cheap but they don't give it away. Anybody?
Reply With Quote
  #55  
Old 03-15-2010, 12:26 PM
limabeanactuary's Avatar
limabeanactuary limabeanactuary is offline
Mary Pat Campbell
 
Join Date: Jan 2010
Studying for Anglo-Saxon
Favorite beer: Bass Ale
Posts: 14,142
Default

This should be interesting:
http://www.ft.com/cms/s/0/fe56a94a-2...nclick_check=1

Quote:
Moody’s Investor Service, the credit rating agency, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.

Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”

....


The report follows concerns recently expressed about the US public finances from the other large rating agencies. Standard & Poor’s warned last week the triple A status of the US was at risk unless the country adopted a credible medium-term plan to rein in fiscal spending. Fitch Ratings issued a critical report on the US in January.

Fitch said: “In the absence of measures to reduce the budget deficit over the next three to five years, government indebtedness will start to approach levels by the latter half of the decade that will bring pressure to bear on the triple A status.”

None of the ratings agencies has so far threatened immediate action to downgrade the US, but all have intensified their rhetoric in recent months.

But investors remain unconcerned that the US will be downgraded in spite of the growing debate among the agencies over the creditworthiness of the world’s biggest economy.

Markets have not moved on these doubts, with benchmark US 10-year Treasury yields, which have an inverse relationship with prices, holding steady. They closed on Friday nearly a quarter of a percentage point lower than the start of the year, underlining the continuing demand for US debt.
Hmmm.
Reply With Quote
  #56  
Old 03-15-2010, 03:26 PM
limabeanactuary's Avatar
limabeanactuary limabeanactuary is offline
Mary Pat Campbell
 
Join Date: Jan 2010
Studying for Anglo-Saxon
Favorite beer: Bass Ale
Posts: 14,142
Default

This may be related:
http://news.yahoo.com/s/ap/20100314/..._security_ious
Quote:
PARKERSBURG, W.Va. – The retirement nest egg of an entire generation is stashed away in this small town along the Ohio River: $2.5 trillion in IOUs from the federal government, payable to the Social Security Administration.

It's time to start cashing them in.

For more than two decades, Social Security collected more money in payroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.
....


Gore lost the election and never got his lockbox. But to illustrate the government's commitment to repaying Social Security, the Treasury Department has been issuing special bonds that earn interest for the retirement program. The bonds are unique because they are actually printed on paper, while other government bonds exist only in electronic form.
....
One bond is worth a little more than $15.1 billion and another is valued at just under $10.7 billion. In all, the agency has about $2.5 trillion in bonds, all backed by the full faith and credit of the U.S. government. But don't bother trying to steal them; they're nonnegotiable, which means they are worthless on the open market.



They're real! They're really real! They're printed on paper, thus more realer than those electronic doohickeys!

Quote:

"Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."
Oh, Kennelly, why did you have to make China and Japan nervous? That wasn't very smart.
Reply With Quote
  #57  
Old 03-16-2010, 08:47 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: 83,236
Blog Entries: 6
Default

Oh, right, what was that about China and Japan?
http://www.businessweek.com/news/201...n-january.html

Quote:

China and Japan, the two biggest foreign holders of Treasuries, reduced their positions of U.S. government debt in January as a measure of demand for American financial assets fell to a six-month low.

China remained the biggest owner abroad of Treasuries, even as its holdings dropped by a net $5.8 billion to $889 billion, according to Treasury Department data released yesterday in Washington. Japan cut its holdings in January by $300 million to $765.4 billion, the report showed.

China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar’s role as a reserve currency and recently sought assurances about the safety of U.S. government debt as the budget deficit widens to a projected record $1.6 trillion this year.

“Foreign central banks stopped buying Treasuries in January,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “If this were to continue, if China were to stop recycling its dollars into U.S. Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher.”

Oh, I think something other than just mortgage rates might be impacted by this.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #58  
Old 03-16-2010, 10:09 AM
FormLetter's Avatar
FormLetter FormLetter is offline
Member
 
Join Date: Feb 2006
Posts: 48,524
Default

Anybody smell protectionism around the bend?
Reply With Quote
  #59  
Old 03-16-2010, 10:13 AM
JohnAdams
Guest
 
Posts: n/a
Default

I can't believe that Obama is being blamed for the ship he inherited. Any fool could foresee this happening during the Bushbarian Reign of Terror.

Not only 'could foresee' it happening, how could you not foresee it happening?

His response has not been stellar of course. Impossible situation in many respects.


How clever of the Republicrats.......they ensured that the Democans would be blamed for the irresponsibility of the Republicrats.
Reply With Quote
  #60  
Old 03-16-2010, 01:34 PM
Irish Blues
Guest
 
Posts: n/a
Default

Quote:
Originally Posted by limabeanactuary View Post
Words are meaningless without actions. Moody's is threatening to do something at some point ... maybe. This has as much power as a rebuke of someone in Congress: none. Considering the track record of the major rating companies in identifying institutions in trouble, we can expect Moody's to actually do something about 6 months after shit hits the fan. In other news, Bernanke and Geithner are committed to reducing systemic risk and believe that failing institutions should not be propped up.


Quote:
Originally Posted by campbell View Post
Oh, I think something other than just mortgage rates might be impacted by this.
:pray: Please let us sell the current house and buy a new one before mortgage rates blow up. [Of course, if interest rates take off I expect the U.S. government to just cap the interest rate borrowers pay at something like 5-6% and agree to eat the rest in the name of "saving the economy from ruin."]

Quote:
Originally Posted by FormLetter View Post
Anybody smell protectionism around the bend?
I've been hearing about how protectionism was imminent for 2 years now. I think it eventually comes along in a last-ditch, desperate measure - but I still don't think it's imminent [read: in 2010].

Quote:
Originally Posted by JohnAdams View Post
I can't believe that Obama is being blamed for the ship he inherited. Any fool could foresee this happening during the Bushbarian Reign of Terror.

Not only 'could foresee' it happening, how could you not foresee it happening?

His response has not been stellar of course. Impossible situation in many respects.

How clever of the Republicrats.......they ensured that the Democans would be blamed for the irresponsibility of the Republicrats.
Both parties have been [and continue to be] completely irresponsible wrt government spending. The only difference is whose ox is getting gored by the decisions made; neither party is willing to make the hard choices that are necessary to right the financial ship of this country - and as a result, we're all going to suffer for it.

Obama would be in much better shape if he had stuck to the campaign speeches and gone after corruption on Wall Street and focused on slashing government spending; instead, he all but handed Wall Street everything it wanted and a bag of loot as a bonus, and proceeded to try and ram through even more government spending in a half-assed healthcare bill. There's no way he's backtracking on either of those things without killing what little credibility he has left, and as a result he's probably doomed himself to just one term as President. [Unless the GOP trots out some idiot like Romney or Palin to run for President - in which case, all bets are off.] That can't be laid at the feet of the other party.
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 09:30 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 0.53969 seconds with 10 queries