Banks own more Treasuries now than basically ever before, as it seems Standard & Poor’s didn’t consider that Dodd-Frank was basically just a scam to force banks to buy up the stuff even though it makes no economic or business sense whatsoever. Read more »
There’s something interesting going on in these Wall Street Journal articles (Money & Investing and Deal Journal) today about how corporate bonds now sometimes trade inside of Treasuries. Or somethings interesting; one thing that’s going on is, like, why the day after the election? One possibility is that the message here – which the Journal is helpfully conveying from bond investors to the government – is “see? get your fiscal cliff shit together or soon you’ll be pricing your bonds outside of Google, and you don’t want that do you?”
BUT THE GOVERNMENT HAS A PRINTING PRESS oh never mind. Maybe Exxon does too, I don’t know.
“We’re not overweight Treasuries. We’re certainly underweight Treasuries, but that does not mean we don’t own lots of other bonds. German bunds and Canadian bonds are rallying. We simply think those are better alternatives. It does not mean as well that we’re not a little bit shy in terms of duration…Bloomberg’s numbers as of last night show us beating 2/3’s of managers. We’re having a good year…so don’t cry for Pimco.” Read more »
It’s “a no brainer” to sell short Treasuries, Nassim Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”
Is anyone else looking forward, really looking forward to The Safecracker’s Beijing trip next week? We certainly are. Reuters says this:
U.S. Treasury Secretary Timothy Geithner has a chance next week to persuade anxious Chinese authorities their investments in huge and growing volumes of U.S. debt securities are safe and sound.
His visit to Beijing must deal with tough economic realities: the United States is issuing new debt in record volumes as it seeks to finance an array of programs to right its economy, while China is growing nervous about whether its U.S. “nest egg” is secure.
Of course, much hinges on the Timster’s visit. A small error could spell big problems. So we’ve put together a little “DOs” and “DON’Ts” list. We know Tim reads us, so we’re confident this will smooth things over and keep things on the up and up.
DO: Make sure your visa is in order before getting on the government jet.
DON’T: Bring sunscreen. The smog takes care of that for you.
DO: Bring Treasury brochures and marketing materials. We are particularly partial to the “Safe Savings For Education” series.
DON’T: Try to avoid the VAT. We know it is tempting. Just trust us. They aren’t as forgiving as confirmation committees in the United States. And, no, Tim, there is no “TurboTax 2009: The Chinese VAT” software add-on.
DO: Bring enough lubricant. Xie Xuren will want some minions to try before he buys.
DON’T: Present a Publisher’s Clearing House sized check for “Six Dollars” marked “Paid In Full” at the bottom. Chinese humor can be difficult to manage and the consequences of failure are extreme.
DO: Beg. It works in the East.
DON’T: Bow when the cameras are rolling. Duh.
DO: Be polite to your secret-police minder.
DON’T: Ask him about the execution/organ harvesting vans unless you want a personal tour.
We are pretty confident that, if he follows our advice, Timmy will manage his way back just fine. (Though sitting on the plane for double digit hours on the way home might be a tad painful).
Geithner to Beijing: Keep buying our debt [Reuters]
So, what do you make of the sudden collapse of 30 year Treasuries?
Open forum on the topic in comments.
30-Year Treasury Bond Collapses [Alea]
No wonder they want to invent a reserve currency that has some merits over the United States Dollar. It would be a form of methadone treatment:
China, the U.S. government’s biggest creditor, increased its purchases of American securities in February just weeks before the country’s officials questioned whether such investments were safe.
While China’s purchases slowed and most were in short-term Treasury bills, the country remained the largest foreign holder of Treasuries after its holdings rose 0.6 percent to $744.2 billion, according to a monthly report released in Washington.
We have long considered hollow the cries that the Chinese might abruptly cut off their large-scale purchasing of Treasuries. To do so would be cutting their own throat as their own prosperity is tied quite directly to their ability to find and fund customers for their chief exports (cheap labor and manufacturing). It is worth pointing out that Chinese leaders are not afraid of being deposed. They are afraid of being shot if they break the grand bargain they struck with their subjects: keep us in power, we’ll give you a taste of capitalism and the trappings of upward mobility, but we will manage that social stuff and political voice for you.
China Bought More U.S. Securities Even as Its Concerns Grew [Bloomberg]
Our spy on a Treasuries desk has some interesting things to say via the mailbag about the bond market in the imminent face of $300 billion in quantitative easing by proxy:
Wall Street Dealers are giving the Treasury the biggest “fuck you” on new Treasury debt. There’s an auction today and a buy program tomorrow. Since Bernanke just announced that the Treasury is buying bonds, Wall Street- the dealers en masse- are basically refusing to show a good bid but then taking out a huge profit out of the Treasury. You want to talk 90% taxes? This is unprecedented.
Hell hath no fury like a bond trader scorned? We aren’t so sure. The UK had similar problems today.
The U.K.’s effort to buy government debt wasn’t enough to prevent today’s failed auction of 40-year gilts, the first time that the government failed to attract enough bids at a sale of nominal debt since 1995. Investors bid for 1.63 billion pounds ($2.4 billion) of 4.25 percent notes, less than the 1.75 billion pounds offered.
“The failed gilt auction doesn’t bode well for Treasuries,” said Michael Franzese, head of government bond trading for Standard Chartered in New York. “It is a supply issue on top of that. Is the buying that’s happening today by the Fed going to offset the selling that’s going on today and tomorrow by the Treasury?”
What say you DB? The largest bond price fixing conspiracy in history? That would be quite entertaining.
Treasuries Fall as Five-Year Note Auction Draws Yield of 1.849% [Bloomberg]