Posts Tagged ‘bonds’
Obama Pays More Than Buffett as U.S. Risks AAA Rating
By Daniel Kruger and Bryan Keogh
March 22 (Bloomberg) — The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.
Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.
“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
Read more at http://www.bloomberg.com/apps/news?pid=20601087&sid=aYUeBnitz7nU
We’re Broke!
Class Warfare’s Next Target: 401(k) Savings
by NEWT GINGRICH AND PETER FERRARA, Investor’s Business Daily, 02/17/2010
You did the responsible thing. You saved in your IRA or 401(k) to support your retirement, when you could have spent that money on another vacation, or an upscale car, or fancier clothes and jewelry. But now Washington is developing plans for your retirement savings.
BusinessWeek reports that the Treasury and Labor departments are asking for public comment on “the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams.”
In plain English, the idea is for the government to take your retirement savings in return for a promise to pay you some monthly benefit in your retirement years.
They will tell you that you are “investing” your money in U.S. Treasury bonds. But they will use your money immediately to pay for their unprecedented trillion-dollar budget deficits, leaving nothing to back up their political promises, just as they have raided the Social Security trust funds.
Read more at http://www.investors.com/NewsAndAnalysis/Article.aspx?id=521423
Muni Threat: Cities Weigh Chapter 9
by Ianthe Jeanne Dugan and Kris Maher, Wall Street Journal, Feb. 18, 2010
Just days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9.
The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts. Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders.
The economic slump, however, …
Read more (subscription required) at http://online.wsj.com/article/SB20001424052748704398804575071591602878062.html
(Wisconsin) Pensions Look to Leverage Up
by Craig Karmin, Wall Street Journal, January 27, 2010
Public pension funds needing to boost their returns but frustrated with hedge funds and private-equity investments are turning to one of the oldest investment strategies—using borrowed money to boost performance.
The strategy calls for leveraging pension funds’ safest asset—government or other high-grade bonds—while reducing exposure to stocks.
The State of Wisconsin Investment Board, which manages $78 billion, became among the first to adopt the strategy when it approved the plan Tuesday. The fund will borrow an amount equivalent to 4% of assets this year, and as much as 20% of its assets over the next three years.
Read more at http://online.wsj.com/article/SB20001424052748704905604575027601300360196.html (WSJ Subscription required)
You can read more at http://globaleconomicanalysis.blogspot.com/2010/01/state-of-wisconsin-goes-insane-with.html
Robbing Peter to pay Paul
by Jerome Corsi, World Net Daily, 1/15/2010
Statistics from the federal government document how the Federal Reserve over the course of 2009 bought some 80 percent of the $1.5 trillion borrowed by the U.S. Treasury – making the federal government like the family that uses Visa to pay down a monthly MasterCard bill.Remarkable as that may seem, data make clear the Obama administration has been managing trillion dollar federal budget deficits by selling financial instruments to the Fed.
Even to sophisticated investment analysts, using the Fed to buy Treasury debt is the equivalent of simply printing money to pay for government-funded programs an increasingly bankrupt United States can no longer afford.
While the Federal Reserve’s massive purchases of Treasury bonds and government agency debt, including debt issued by the government-sponsored mortgage giants Fannie Mae and Freddie Mac, has keep interest rates low, the Federal Reserve Open Market Committee in its Dec. 15-16, 2009, meeting strongly suggested the program to buy debt issued by U.S. Treasury, government-sponsored agency debt and mortgage-backed securities will come to a close at some point.
Read more at http://www.wnd.com/index.php?fa=PAGE.view&pageId=121993
The Fed is monetizing the debt, i.e. printing money out of thin air to buy treasury bonds, “supporting” the bond market. This is NOT healthy.
“How will Obama continue to sell trillions of dollars of debt?”
CHINA: ‘The world does not have Money to buy more US Treasuries’…
By Zhou Xin and Jason Subler, Shanghai Daily, December 18, 2009
IT is getting harder for governments to buy United States Treasuries because the US’s shrinking current-account gap is reducing supply of dollars overseas, a Chinese central bank official said yesterday.
The comments by Zhu Min, deputy governor of the People’s Bank of China, referred to the overall situation globally, not specifically to China, the biggest foreign holder of US government bonds.
Chinese officials generally are very careful about commenting on the dollar and Treasuries, given that so much of its US$2.3 trillion reserves are tied to their value, and markets always watch any such comments closely for signs of any shift in how it manages its assets.
China’s State Administration of Foreign Exchange reaffirmed this month that the dollar stands secure as the anchor of the currency reserves it manages, even as the country seeks to diversify its investments.
In a discussion on the global role of the dollar, Zhu told an academic audience that it was inevitable that the dollar would continue to fall in value because Washington continued to issue more Treasuries to finance its deficit spending.
Read more at http://www.shanghaidaily.com/sp/article/2009/200912/20091218/article_423054.htm