Hi,
Several points related to US Treasuries;
US Treasury prices have been rising/yields falling while equities (Dow, SP) are also rising.........up until yesterday.
Looking forward in time it is the expectation is for the United States to increase deficit spending by some $500B, which if the laws of supply/demand hold therefor implies higher yields than the current negative 1.8% for 10 year Notes..........and inflation numbers continue to run higher.
By virtue of rising Treasury prices and falling yields the bond market seems to be saying that it does not think the FED is likely to raise rates any time soon and maybe not any time later either.
To support that view Bill Gross recently stated that the Paulson/FED intervention has been designed to;
1 - to prevent a market run on the price of bank and investment bank stocks until there is enough time to re-inflate US housing prices.
2 - ultimately re-capitalize primary mortgage lenders FNMA and FM.
Gross also pointed out, "Make no mistake, the current conundrum is how to make 120 million US homes stop going down in price and start to get the price going up again. If that does not happen then Washington and Wall St and Main St have a problem."
With circumstances like that it seems inconceivable that the FED is likely to raise rates any time soon or probably any time later either since a turnaround in housing probably only becomes realistic once inventories are reduced considerably.
Also related to interest rates is the increasing difficulty for banks and others to raise very much needed capital, and if financials, housing and consumers are de-leveraging it again seems to defy logic that the FED can realistically contemplate raising the cost of money, not to mention informed positions of Rogoff pointing to the probability of a major bank failure and/or Roubini who says 100s of banks are marginal.
That seems to leave rate-cuts or speculation of rate-cuts by other central banks with the FED reduced to more or less making implied or measured verbal threats over rates as the only other realistic alternatives.
Several points related to US Treasuries;
US Treasury prices have been rising/yields falling while equities (Dow, SP) are also rising.........up until yesterday.
Looking forward in time it is the expectation is for the United States to increase deficit spending by some $500B, which if the laws of supply/demand hold therefor implies higher yields than the current negative 1.8% for 10 year Notes..........and inflation numbers continue to run higher.
By virtue of rising Treasury prices and falling yields the bond market seems to be saying that it does not think the FED is likely to raise rates any time soon and maybe not any time later either.
To support that view Bill Gross recently stated that the Paulson/FED intervention has been designed to;
1 - to prevent a market run on the price of bank and investment bank stocks until there is enough time to re-inflate US housing prices.
2 - ultimately re-capitalize primary mortgage lenders FNMA and FM.
Gross also pointed out, "Make no mistake, the current conundrum is how to make 120 million US homes stop going down in price and start to get the price going up again. If that does not happen then Washington and Wall St and Main St have a problem."
With circumstances like that it seems inconceivable that the FED is likely to raise rates any time soon or probably any time later either since a turnaround in housing probably only becomes realistic once inventories are reduced considerably.
Also related to interest rates is the increasing difficulty for banks and others to raise very much needed capital, and if financials, housing and consumers are de-leveraging it again seems to defy logic that the FED can realistically contemplate raising the cost of money, not to mention informed positions of Rogoff pointing to the probability of a major bank failure and/or Roubini who says 100s of banks are marginal.
That seems to leave rate-cuts or speculation of rate-cuts by other central banks with the FED reduced to more or less making implied or measured verbal threats over rates as the only other realistic alternatives.
.
worst p
actually makes me nervous, not for my own sake because im not one of the fools who is long this m
