Debt sales highlight abnormal conditions

Discussion in 'Wall St. News' started by ASusilovic, Oct 26, 2010.

  1. The abnormal state of the credit markets came into focus as the US Treasury sold bonds with negative interest rates for the first time and Goldman Sachs prepared to issue its first 50-year debt deal.

    Both developments on Monday highlighted the difficult choices facing investors at a time when interest rates are at historical lows and the Federal Reserve is moving towards more asset purchases aimed at boosting the economy and staving off deflation. Investors who believe the Fed will succeed in its efforts – which would lead to higher inflation – accepted a yield of minus 0.55 per cent on $10bn of Treasury Inflation Protected Securities – or Tips – which compensate holders if the consumer price index rises.

    What a farce. Fortescue Metals Group from Australia is just offering 8 % yield on sales of bonds. For every yield hungry bond investor :