Government Bonds World Wide Are Falling In Value
Saturday, 26. April 2008, 23:50:47
A Run On The US Treasury Bonds Is Well Underway
The futures market had run up the 30 Year Treasury, $USB, to full retracement of 118.5; and now the futures market place is running it down.
Due to the October 8, 2007 Citicorp-CDO Bust, margin credit and credit of all types has become tight as reflected in a rising Ted Spread; and now banks are even reluctant to lend to each other, so the Fed has pulled out all the stops: not only has it lowered interest rates, it's has used the facilities TAF, TSLF and PDCF to swap out bad debt owned by the banks and investment bankers for AAA rated US Government bonds.
Talk all you want, about the Fed lowering the interest rates; all the Fed is doing is lowering the interest rate it charges banks, is injecting liquidity in order to save insolvent banks.
Chart of the 30 Year Government Bond Fund, BTTRX, and its inverse RYJUX, suggest that a run on the US Treasuries is underway as well; the fall of BTTRX to the middle of its 'broadening top pattern' suggests that an sharp sell off in the US Treasuries is at hand.
The Futures Market Place 30 Year Treasury Bonds, $USB, have been falling in value, due to an increase in real interest rates; those with risk capital will eventually push the U.S. Treasury Bond, $USB, from its current value of 116.98 to 10 or 8.
The Fed only controls interest rates on the short end; the futures bond market place determines the interest rate on the long end; and the market place rates have decoupled from the Fed's: the real interest interest rate, $TYX, has been rising of late.
Bespoke Investment Group relates that interest rates are on the rise globally.
Paul Kasriel relates that the non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now?
If you don't believe me, that a run on the US Government Bonds is now in full swing, then maybe the Bloomberg report by Gavin Finch and Sandra Hernandez U.S. Notes Decline, Headed for Biggest Two-Week Loss Since 2001 will convince you.
Or perhaps this Wes Goodman Bloomber report will establish the fact: The Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt. Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15, 2008.
CNN's Chris Isisore relates that the S&P says that saving Fannie,FNM, and Freddie, FRE, might cost so much that the federal government's AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become fantastically expensive as the government bonds go through the floor.
Japanese Bonds Fall In Panicked Selling
Bloomberg's Theresa Barraclough and Yumi Teso report that: "Japanese government bonds tumbled, causing the biggest jump in five-year yields in nine years, after inflation accelerated, stocks climbed and the dollar rallied against the yen. Ten-year bond futures plunged as much as 1.8%, forcing the Tokyo Stock Exchange to order a 15-minute halt in trading for the first time since September 2002... 'The market is in a bit of a panicked state,' said Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co... 'I can't say how far Japanese bond yields will rise, because they've already broken through my forecast levels and the selling pressure could snowball from here.'"
Rising Inflation Is Destroying Government Bond Values Worldwide
Inflation is rising the fastest in the emerging markets; Ambrose Evans Pretchard reports the headline rates: Vietnam (21pc), Russia (14pc), Qatar (14pc), UAE (11pc), Saudi Arabia (8.7pc), China (8.3pc), India (7.3pc).
Your blog host Richard says: "Inflation, its a bond killer and a commodity thriller": currently the CRB, $CRB, led by agricultural commodities such as wheat and rice are exploding higher; and investment demand for gold, $GOLD, will one day add to the rise in commodity prices as the current run on the US Dollar and the run on the US Government Treasury Bonds pick up steam.
Mr. Pretchard reports that the futures steel contract is a big play, second to oil in the raw materials firmament. World steel output hit a record $660bn last year. Steel futures are a boon to the world's army of small producers. They can at last sell their product into the forward market, hedging risk, Mr. Pretchard says. It eliminates the punitive "haircut" imposed by banks to cover wild price moves. The cost of credit will fall. "This is the first time they have been able to manage their risk and guarantee cash flow," said Liz Milan, the LME's commercial director. This is creative City capitalism at its best.
If America and Japan are in recession, nobody told the steel market. The price of hot-rolled coil used in cars and trucks has risen 40pc since Christmas, reaching a record $1,003 a tonne last week. Billet steel used in buildings has doubled to $965 since the credit crunch began in August. Large demand is coming from the middle eastern oil counteries where construction cranes manifest like droves of pelicans.
The futures market had run up the 30 Year Treasury, $USB, to full retracement of 118.5; and now the futures market place is running it down.
Due to the October 8, 2007 Citicorp-CDO Bust, margin credit and credit of all types has become tight as reflected in a rising Ted Spread; and now banks are even reluctant to lend to each other, so the Fed has pulled out all the stops: not only has it lowered interest rates, it's has used the facilities TAF, TSLF and PDCF to swap out bad debt owned by the banks and investment bankers for AAA rated US Government bonds.
Talk all you want, about the Fed lowering the interest rates; all the Fed is doing is lowering the interest rate it charges banks, is injecting liquidity in order to save insolvent banks.
Chart of the 30 Year Government Bond Fund, BTTRX, and its inverse RYJUX, suggest that a run on the US Treasuries is underway as well; the fall of BTTRX to the middle of its 'broadening top pattern' suggests that an sharp sell off in the US Treasuries is at hand.
The Futures Market Place 30 Year Treasury Bonds, $USB, have been falling in value, due to an increase in real interest rates; those with risk capital will eventually push the U.S. Treasury Bond, $USB, from its current value of 116.98 to 10 or 8.
The Fed only controls interest rates on the short end; the futures bond market place determines the interest rate on the long end; and the market place rates have decoupled from the Fed's: the real interest interest rate, $TYX, has been rising of late.
Bespoke Investment Group relates that interest rates are on the rise globally.
Paul Kasriel relates that the non-partisan Congressional Budget Office is projecting that the fiscal year 2008 federal budget deficit will increase to $396 billion from $162 billion in fiscal year 2007. So, federal borrowing in this fiscal year is projected to be 2.4 times as much as last year. And on top of this increased federal borrowing, we now have the Federal Reserve providing $601 billion less support to the Treasury securities market at an annual rate. Is it any wonder why the yields on Treasury securities are rising now?
If you don't believe me, that a run on the US Government Bonds is now in full swing, then maybe the Bloomberg report by Gavin Finch and Sandra Hernandez U.S. Notes Decline, Headed for Biggest Two-Week Loss Since 2001 will convince you.
Or perhaps this Wes Goodman Bloomber report will establish the fact: The Japanese, who own $586.6 billion, or 12 percent of U.S. government debt, had their worst quarter in Treasuries this decade, losing 7 percent in the first three months of the year as the dollar fell to the lowest since 1995 versus the yen, Merrill Lynch & Co. indexes show. Dai-ichi Mutual Life Insurance Co., Meiji Yasuda Life Insurance Co. and Sumitomo Life Insurance Co., three of the nation's four-biggest insurers, would rather accept the world's lowest bond yields in Japan than buy U.S. debt. Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15, 2008.
CNN's Chris Isisore relates that the S&P says that saving Fannie,FNM, and Freddie, FRE, might cost so much that the federal government's AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become fantastically expensive as the government bonds go through the floor.
Japanese Bonds Fall In Panicked Selling
Bloomberg's Theresa Barraclough and Yumi Teso report that: "Japanese government bonds tumbled, causing the biggest jump in five-year yields in nine years, after inflation accelerated, stocks climbed and the dollar rallied against the yen. Ten-year bond futures plunged as much as 1.8%, forcing the Tokyo Stock Exchange to order a 15-minute halt in trading for the first time since September 2002... 'The market is in a bit of a panicked state,' said Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co... 'I can't say how far Japanese bond yields will rise, because they've already broken through my forecast levels and the selling pressure could snowball from here.'"
Rising Inflation Is Destroying Government Bond Values Worldwide
Inflation is rising the fastest in the emerging markets; Ambrose Evans Pretchard reports the headline rates: Vietnam (21pc), Russia (14pc), Qatar (14pc), UAE (11pc), Saudi Arabia (8.7pc), China (8.3pc), India (7.3pc).
Your blog host Richard says: "Inflation, its a bond killer and a commodity thriller": currently the CRB, $CRB, led by agricultural commodities such as wheat and rice are exploding higher; and investment demand for gold, $GOLD, will one day add to the rise in commodity prices as the current run on the US Dollar and the run on the US Government Treasury Bonds pick up steam.
Mr. Pretchard reports that the futures steel contract is a big play, second to oil in the raw materials firmament. World steel output hit a record $660bn last year. Steel futures are a boon to the world's army of small producers. They can at last sell their product into the forward market, hedging risk, Mr. Pretchard says. It eliminates the punitive "haircut" imposed by banks to cover wild price moves. The cost of credit will fall. "This is the first time they have been able to manage their risk and guarantee cash flow," said Liz Milan, the LME's commercial director. This is creative City capitalism at its best.
If America and Japan are in recession, nobody told the steel market. The price of hot-rolled coil used in cars and trucks has risen 40pc since Christmas, reaching a record $1,003 a tonne last week. Billet steel used in buildings has doubled to $965 since the credit crunch began in August. Large demand is coming from the middle eastern oil counteries where construction cranes manifest like droves of pelicans.
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