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Thread: Treasury Yields Drop to Year Low as European Crisis Intensifies

  1. #1
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    Treasury Yields Drop to Year Low as European Crisis Intensifies

    I think a team of Harvard MBA's business consultants would recommend to any President that this is the time to use this inexpensive money to boost the economy, retrain our unemployed, encourage the young to get further education and rebuild our failing infrastructure.

    But current politics will not allow our leaders to take the money everyone is willing to invest in us.


    [URL="http://www.bloomberg.com/news/2012-01-14/treasury-yields-drop-to-year-low-as-european-crisis-intensifies.html"]http://www.bloomberg.com/news/2012-01-14/treasury-yields-drop-to-year-low-as-european-crisis-intensifies.html[/URL]


    [QUOTE]

    [B]Treasuries rose, pushing yields to the lowest levels this year,[/B] as France was stripped of its top credit rating and talks to restructure Greek’s debt stalled, boosting demand for the safety of U.S. government debt.

    The yield on the benchmark 10-year note touched the lowest level since Dec. 20 yesterday and the [B]Treasury drew record demand at three- and 10-year note auctions this week. A model created by economists at the Federal Reserve that includes expectations for interest rates, growth and inflation indicates 10-year notes are the most overvalued on record.[/B]

    “The story is still about mostly what’s going on in Europe,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “You still have nervousness and that’s bringing a good flight to quality trade here in the states.”

    The benchmark 10-year note yield dropped nine basis points, or 0.09 percentage point for the week, to 1.87 percent yesterday in New York, according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 rose 27/32, or $8.44 per $1,000 face amount, to 101 16/32. The yield dropped six basis points yesterday.

    The so-called term premium model reached a record negative 0.7 percent yesterday, compared with the average of positive 0.60 percent the past decade. The previous record was negative 0.67 percent reached Sept. 22. A negative reading indicates investors are willing to accept yields below what’s considered fair value.

    Credit Ratings

    Germany, Belgium, Estonia, Finland, Ireland, Luxembourg and the Netherlands had their ratings affirmed by S&P as France lost its AAA rating. France was cut to AA+ and the rating has a negative outlook, S&P said in a statement.

    Cyprus, Italy, Portugal, and Spain were cut by two notches S&P said. The long-term ratings on Austria, Malta, Slovakia, and Slovenia were cut one notch.

    Volatility in the Treasury market is near its lowest level in almost seven months. Bank of America Merrill Lynch’s MOVE index (MOVE), which measure price swings in Treasuries based on prices of over-the-counter options maturing in two to 30 years, dropped to 77.1 basis points on Jan. 12, the lowest point since June 13. The 2011 average was 94.14, with a high of 117.8 on Aug. 8 and a low of 71.5 on May 31.

    Treasury market volumes remain below average. About $268 billion of Treasuries changed hands yesterday through ICAP Plc, the world’s largest interdealer broker, below the one-year average of $282 billion.

    Record-Setting Auctions

    [B]The U.S. sold $66 billion in Treasuries this week, including $13 billion of 30-year bonds at lower-than-average demand on Jan. 12 after record-setting auctions the prior two days.[/B]

    The $21 billion sale of 10-year notes Jan. 11 was sold at a [B][U]record low yield of 1.90 percent amid[/U][/B] early speculation that France may lose its top credit rating. The bid-to-cover ratio was 3.29, versus an average of 3.11 for the past 10 auctions.

    The government attracted record demand at its $32 billion sale of three-year notes on Jan. 10. That auction’s bid-to-cover ratio was 3.73, the highest since at least 1993, when the government began releasing the data.

    “It’s one of the only things left for people to buy if you are afraid of Europe falling apart, so it’s putting tremendous amount of bids into our market,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “We’ve definitely benefited from that.”


    [/QUOTE]

  2. #2
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    You do realize that "lowest rate this year" means "since January 1, 2012", right?

    It's lower than at any time since December 20! That's almost a whole month!

  3. #3
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    Who cares?!?! The Big story is [url]http://rt1703.infolinks.com/action/doq.htm?pcode=utf-8&r=1326659733613.1[/url]

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    [QUOTE=doggin94it;4331792]You do realize that "lowest rate this year" means "since January 1, 2012", right?

    It's lower than at any time since December 20! That's almost a whole month![/QUOTE]

    what is your point?

    You realize treasury yields have been low for a very long time, right?

    [URL="http://money.cnn.com/2011/09/13/markets/bondcenter/yields_treasuries/index.htm"]http://money.cnn.com/2011/09/13/markets/bondcenter/yields_treasuries/index.htm[/URL]


    [QUOTE]
    [B][SIZE="5"]Yields keep falling. How low can they go?[/SIZE][/B]
    [SIZE="4"][I]By Hibah Yousuf September 14, 2011: 12:09 PM ET[/I][/SIZE]

    NEW YORK (CNNMoney) -- The 10-year yield broke through its long-term floor of 2% for the first time in history last month, and experts say you might want to get used to that.

    Investors have been seeking safety in U.S. Treasuries in droves amid mounting concerns about Europe's worsening debt crisis and the United States' stalling economic recovery.

    That flight to quality knocked the 10-year Treasury below 2% on Aug. 18, and since then, the yield has been hitting new record lows on an almost daily basis.

    On Monday, the 10-year yield hit a fresh all-time low of 1.87%, although it managed to nudge back up against 2% on Tuesday...
    [/QUOTE]

    The point is the federal government borrowing money when times are tough, unemployment is high and the cost of borrowing is low is [B]smart[/B].

    But borrowing monet when times are good and unemployment is low is [B]stoopid[/B].

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