Lesson in Treasury Yield Curve
Today, Bloomberg News reported that US Treasuries fell in price, with the gap in yields between 2- and 30-year securities reaching the widest margin since at least 1980, after a $13 billion offering of 30- year bonds drew lower-than-forecast demand. The so-called yield curve touched 372 basis points, the most in at least 29 years, as the bonds drew a yield of 4.52 percent. The so-called yield curve has widened from 191 basis points at the end of 2008.
Lesson #1: The Federal Reserve controls the short term interest and the market place controls the long term interest rates. Todays news is telling us that the market place is anticipating much higher long term interest rates (30 year mortgages fall into this category).
Lesson #2: From 1980 to 1984 long term interest rates sky rocketed, if todays news is the start of a trend, then this could be a repeat.
Lesson #3: Foreign central banks, bought 40.2 percent of today’s auction. They purchased 44 percent at the November sale.
January 6th, 2010 at 7:33 pm
Fascinating to see that the Internet now primary source to find real estate.Same % of buyers found home online (36%) as thru a realtor (36%). http://tinyurl.com/ybtqqwd
January 6th, 2010 at 7:36 pm
In Canada our largest Uniion Pension Fund just purchased control of mortgage insurance/guarantee corporation. We have only 4/10s of 1% mortagages in default (USA has ten times that rate) so the Pension fund must view mortgages as still a low risk.
February 21st, 2010 at 2:13 pm
You get the feeling that the investment bankers have paid shills to warn about a bond market bubble every month or so in order to get some IPO’s not worth their weight out the door. If you actually buy the bond in the secondary market, the worst you can do is get the yield you bought it at to maturity. But selling them back with 1-2 years left to maturity has been a winning strategy recently. How is this a bubble?
January 29th, 2011 at 1:07 pm
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February 27th, 2011 at 3:38 am
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