The United States may be hurtling headlong into a debt disaster, but that didn’t seem to bother creditors today.
Sure, the national debt now exceeds $12 trillion, and simply servicing that mountain of IOUs is going to cost almost $1 trillion a year in a decade. Still, bidders today drove down the yield on two-year Treasury notes to an all-time low, as though the U.S. isn’t facing a fiscal reckoning of seriously unpleasant proportions.
The yield on the $44 billion in notes was just 0.802%, down from 1.02% less than a month ago. The mounting debt and continuing weakness in the dollar doesn’t seem to be dissuading foreign central banks from continuing to stockpile greenbacks, either. Indirect bidders bought 44.5% of the bonds, the same as at the Oct. 27 sale, and above the average for the past 10 note sales.
The Treasury is going to continue to push its luck this week, planning to sell $42 billion in five-year debt tomorrow and $32 billion in seven-year debt on Wednesday, before Timmy G. hits the bars in a big way on China’s tab. Each part of this week’s borrowing spree represents a record amount for each term.
Treasury Sells Two-Year Notes at Record Low Yield [Bloomberg]
Wave of Debt Payments Facing U.S. Government [NYT]
68A Sound akin to “Harrumph!” (5)
@1 snort
-Larry Kudlow
@2/NS you get me. -1
fyi price isn’t the same as yield…..it’s actually sort of the opposite
cfa candidate
fyi price isn’t the same as yield…..it’s actually sort of the opposite
cfa candidate
I can actually say with a 99% degree of confidence that price is inverse to yield. Good try shazums… not your best work.
Another CFA candidate.
@4/5,6
Definitely? I’ve always viewed it as a tomato/tomato, potato/potato thing.
-another former Lehman quant
what is yield?
-former Lehman MD
John Shazam – Better stick to simple stuff like equities and who’s doing what to whom at various hedge funds. Leave the complexities of the bond market to us CFA types…
I say Ben Bernanke should make a bold call and raise interest rates by 0.5% immediately. This would give the speculative gold/oil/euro bulls a needed kick in the pants. It would also show the holders of our debt that we are willing to honor our committments to pay the debt. Bottom line the price of gold would drop and investors would pump money into the eceonomy instead of hoarding. The price of oil would drop to $40 a barrel (where it should be based on supply and demand) giving all the US car owners an extra $30 to $40 bucks a week to pump back into the economy. Next, the euro, the yen and other currencies would fall thereby shutting up the “America will fail” haters. Lastly, Ben Bernanke will show Congress that debt is not free, the Fed is independent, and that Congress better think long and hard about how to spend the People’s money.
Ben Bernanke should make a bold call and raise interest rates by 0.5% immediately. This will have five immensely positive steps. 1) It would show Congress that Ben B. has the balls to get the job done and that Congress better think long and hard about it spends the People’s money. 2) It would cause the gold price to drop. The “pull your money out of the banks and buy gold because the end is nigh” crowd would get a needed kick in the pants causing them to spend again and have greater faith in the American dollar. 3) Oil would drop to $40 a barrel giving the average car driving consumer an extra $40 bucks to spend. 4) The euro, yen, and other currencies would take a hit easing concerns that the dollar is about to totally collapse and 5)It would reward those investors who hold our debt or who keep cash in the cds, savings accounts,etc. The past two years of rate cuts and 0% rates have really hurt these investors and they deserve to be rewarded for having faith in the dollar.