Posts Tagged ‘bonds’

–SNIP– What this means simply is that as of this moment, the Fed has, in its possession, a record 30.32% of all outstanding ten year equivalents, or said in plain English: duration-adjusted government bonds. It also means that the amount of bonds left in the hands of the private sector has dropped to a record low 69.68% from 69.95% in the prior week.

America may or may not be becoming increasingly socialist and/or nationalized, but there is no doubt about it: its bond market most certainly is.

Read more at ZeroHedge.com

Yeah, it’s going to do you a lot of good….

President Obama’s budget, to be released next week, will limit how much wealthy individuals – like Mitt Romney – can keep in IRAs and other retirement accounts.

…

Under the plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million this year.

Read more by Karl Denninger at market-ticker.org

I’ve laid this out before but it’s time to do it again, because it’s coming folks.

The recent ditty on how “nobody needs more than $3m for retirement”, defined as “whatever you need to get a $200,000 annuity”, is just one facet of how this will play out.

Since I started writing The Ticker I have been repeatedly asked where one should put their assets to evade confiscation, whether through outright acts of theft, devaluation or any other means.

Read more by Karl Denninger at market-ticker.org

How bad is the USA’s debt problem (as we approach the dreaded debt ceiling debate)?

Federal government debt held by the public surged starting in Q2 2008.

But since Q2 2008, government debt held by the public surged 113%. But real GDP growth over 4+ years was a measly 2.6%. That’s not annual real GDP growth, but real GDP growth over 4+ years!

Read more by Anthony B. Sanders at confoundedinterest.wordpress.com

With Spanish 10Y yields hovering at a ‘relatively’ healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notes, Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years - the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds - and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly “We are very worried about this, we just don’t know who’s going to pay for the pensions of those who are younger now,” or those who are older we would add.

Read more at ZeroHedge.com

Treasury, Labor on path to nationalize retirement

Two years ago, as WND reported, the Obama administration was proceeding with a novel way to finance trillion-dollar budget deficits by forcing IRA and 401(k) holders to buy Treasury bonds by mandating the placement of government-structured annuities in their retirement accounts.

Remarkably, those financial professionals specializing in private retirement savings and the U.S. citizens investing in private retirement plans now face the possibility the Obama administration and its allies on the political left will impose rules and regulations that effectively abolish the private retirement savings and investment markets.

Recent evidence suggests government officials continue to eye the multi-trillion dollar private retirement savings market, including IRAs and 401(k) plans, eyeing the opportunity to redistribute private retirement savings to less affluent Americans and to force the retirement savings out of the private market and into government-controlled programs investing in government-issued debt.

Read more by Jerome Corsi at WND.com

The latest round of quantitative easing announced Thursday by the Federal Reserve will almost certainly trigger a rating downgrade by Egan-Jones.

Already the rating agency had warned on Wednesday when it affirmed the U.S. rating at AA that “QE3 will likely trigger a negative action.”

Given that the outlook is already negative (AA-), a downgrade to AA- would be a logical next step for the rating agency.

“We are not receiving QE3 positively,” Vice President and co-manager of the ratings’ desk Bill Hassiepen told MNI Thursday, while the fiscal situation is a “nightmare.”

Read more by Yali N’Diaye at ForexLive.com

The Federal Reserve’s announcement last month that it would continue Operation Twist—selling short-term Treasury securities and using the money to buy longer-term bonds—vividly demonstrates the intellectual bankruptcy of Ben Bernanke. The idea behind Operation Twist was that it would lower the rates of mortgages and corporate bonds, which would, in turn, rev up the economy. The failure since 2008 of promiscuous money printing and interest rate manipulation to reboot our stagnant economy has made no impression on Bernanke and the institution he heads. That such continuous failure has not led to soul-searching at the Fed, the White House, the Treasury Department, the mainstream media, Congress and the economics profession is astounding.

Read more by Steve Forbes at Forbes.com

In June of each year the Social Security Trust Fund (SSTF) reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

Bernanke’s Fed has set interest rates at zero the past four years. In 2012 the 1960’s formula has finally caught up with the SSTF. It got murdered on this year’s rollover.

Read more by Bruce Krasting

Forget Broccoli

Americans are either celebrating or damning the Supreme Court’s 5-4 ruling that the individual mandate is constitutional.

–SNIP– If America wants to overturn current legal norms America needs to elect different politicians. But with a greater and greater welfare-bound population, it seems inevitable that more and more Americans will vote themselves greater and greater quantities of free stuff.

Yet there is a bigger point to all of this, and it’s nothing to do with broccoli.

If Congress can constitutionally create a mandate for individuals to purchase healthcare, then Congress can create a mandate for individuals to purchase financial securities. Which — given the fiscal cliff that we are about to run off, and the reality that more and more sovereigns are dumping dollars and treasuries — could well be a useful weapon in keeping the Treasury’s borrowing costs low and the bread and circuses flowing.

Read more by John Aziz at azizonomics.com

Surprised local taxpayers from Stockton, Calif., to Scranton, Pa., are finding themselves obligated for parking garages, hockey arenas and other enterprises that can no longer pay their debts.

Officials have signed them up unknowingly to backstop the bonds of independent authorities, the special bodies of government that run projects like toll roads and power plants.

The practice, meant to save governments money, has been gaining popularity without attracting much notice, and is creating problems for a small but growing number of cities.

Read more by Mary Williams Walsh from The New York Times at CNBC

Are you concerned about growing income inequality in America? Are you resentful of all that wealth concentrated in the 1 percent? I’ve got the perfect solution, a modest proposal that involves just a small adjustment in the Federal Reserve’s easy monetary policy. Best of all, it will mean that none of us have to work for a living anymore.

For several years now, the Fed has been making money available to the financial sector at near-zero interest rates. Big banks and hedge funds, among others, have taken this cheap money and invested it in securities with high yields. This type of profit-making, called the “carry trade,” has been enormously profitable for them.

So why not let everyone participate?

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

By Sheila Bair at Washington Post

Moody’s Investors Service on Thursday (April 12) downgraded Milwaukee’s general obligation rating by one notch, to Aa2 from Aa1, citing a decline in the city’s property valuations and resident income levels.

Read more at Chicago Tribune

Egan-Jones Ratings Co. cut the U.S. credit rating one step to AA, the second downgrade in nine months and two levels below its highest grade, with a negative outlook citing the nation’s increasing debt burden.

U.S. debt has increased to 100 percent of gross domestic product, while debt climbed 23.6 percent from 2008 to 2010, the credit-rating firm said in a statement today. Egan-Jones lowered the U.S. grade to AA+ in a July.

Read more by John Detrixhe on Apr 5, 2012 at Bloomberg.com

Fed’s ‘Operation Twist’ Gets Mixed Reviews in Markets

The Federal Reserve’s Operation Twist was everything it was cracked up to be, and even a bit more.

While the stock market was less than impressed with the central bank’s latest stimulus plan, the bond market was all for it.

And why not?

The Fed announced it would direct $400 billion from the sale of Treasurys of three years and less in duration and invest it in those with maturities of six to 30 years.

The total was about $100 billion more than expected and an indication that the Twist—which seeks to lower long-term borrowing costs by compressing the yield curve for government debt—was on in a big way.

“This is about as aggressive as you can be without actually expanding the balance sheet,” said Kevin Ferry, president of Cronus Futures Management in Chicago. “Will it work? Is there going to be less debt in the system or more? There’s going to be more. The Treasury’s obligations are going to come due.”

Following the news, the market for government debt jumped. The benchmark 10-year note saw its yield shrink below 1.90 percent and the long bond, with duration of 30 years, threatened to dip below 3 percent.

Read more by Jeff Cox, Senior Writer at CNBC.com