dont stand in the way of the bubble. i think the us bond crash will be the no.1 money making opportunity of my lifetime, but it prolly aint going to happen yet. need parabolic breakout to 130-140 in ZB before im looking to pick the top...
I understand the concept of flight to safety, in US govt notes but would you think people should also factor in the trillions and trillions of dollars of new liability that the US govt now has? either they A) wont be able to pay them B) will have to use inflation to pay them, by inflating the debt away.... both are extremely bad for bonds do most people see this, or they do and just don't care, or am I just wrong?
Treasury 3-Month Bill Rates Drop to Lowest Since at Least 1954 By Sandra Hernandez and Agnes Lovasz Sept. 17 (Bloomberg) -- U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of American International Group Inc. Investors pushed the rate as low as 0.233 percent as the loss of confidence in credit markets deepened. Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman. ``People are extremely cautious with respect to who they're lending money to at the moment,'' said Richard Bryant, a Treasury trader at Citigroup Global Markets Inc., one of the primary dealers that trade government securities with the Federal Reserve. ``They're willing to buy very short-dated Treasury instruments and forgo returns and in some cases pay for the privilege of knowing their money is safe.'' Three-month bill rates fell 46 basis points to 0.23 percent at 9:34 a.m. in New York. They had dropped to 0.3867 percent on March 20, after the Fed and Treasury engineered the takeover of Bear Stearns Cos. The yield on the two-year note fell 11 basis points, or 0.11 percentage point, to 1.68 percent, according to BGCantor Market Data. The 2.375 percent security maturing August 2010 rose 7/32, or $2.19 per $1,000 face amount, to 101 11/32. The difference between what the U.S. government and banks pay to borrow in dollars for three months, the so-called TED spread, widened to the most since the October 1987 stock-market crash as bill yields tumbled. The spread widened as much as 64 basis points to 283 basis points. It was as low as 75 basis points on May 27. Federal Takeover The cost of borrowing in dollars for three months jumped the most since 1999 as banks hoarded cash amid concern more financial institutions will fail. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers' Association said today. The increase is the biggest since Sept. 29, 1999, during the run-up to the new millennium. Treasuries had declined earlier as the Fed's $85 billion loan to AIG allayed concern that a collapse of the insurer would destabilize the financial system. Barclays Plc, the U.K.'s third-biggest bank, will acquire Lehman's North American investment-banking business for $1.75 billion, three days after abandoning plans to buy the entire firm. `Under the Carpet' Central banks around the world pumped more than $280 billion into the financial system this week as they sought to ease a credit-market seizure. The Fed offered the loan to AIG, the biggest U.S. insurer by assets, in exchange for control. The AIG rescue ``smacks of sweeping the problem under the carpet rather than solving it in a structural sense,'' said Padhraic Garvey, head of investment-grade debt strategy at ING Bank NV in Amsterdam, in a note to clients. ``At least the Lehman saga has gone some way toward a clean-up. We are still in the midst of the flight-to-quality environment.'' HBOS Plc, the U.K.'s biggest mortgage lender, slid as much as 52 percent today on speculation it may not have access to funding. The shares rebounded, surging as much as 18 percent, as HBOS said it's in ``advanced'' takeover talks with Lloyds TSB Group Plc. To contact the reporters on this story: Sandra Hernandez in New York at shernandez4@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net Last Updated: September 17, 2008 09:38 EDT
They see it, they just didn't care. The marginal buyers in bonds the last few weeks weren't long-term investors, they were shorts getting squeezed, and short-term hedge funds & speculators making a momentum play on the financial system getting stuffed. There's no point trying to rationalise speculative excess. If you are right long-term, but short-term the market is in the grip of momentum, just stand aside and wait for the momentum to top out and start reversing, showing weakness not strength in the tape. 9 times out of 10, you get in at a better price, and you avoid all the headaches. Short from 117 up to 125 and back is 10 times worse than flat from 117 to 125 and then short at 117 on the way back down. In the former case you might get unlucky and cover at the highs. In the latter case you might get lucky and short the highs. Today was funny in T-bills, I had some parked for credit security reasons, saw them blip up over 0.5%, sold. First time I ever scalped T-bills for a grand or two.