why are people piling into US notes?

Discussion in 'Economics' started by jasonjm, Jul 15, 2008.

  1. jasonjm


    I understand flight to quality, which we have seen may times over the last 12 months....

    But this time around:

    1) inflation worldwide has gone insane
    2) the very backer of those notes, the USgovt, is currently under scrutiny by taking on the weight of Fannie, Freddie and other failing banks. It could cause a potential downgrade of US debt, or at the very least, a demand for higher rates to compensate for new risk.

    So again, I don't understand who is buying US govt notes?
  2. Japan is far more in debt than us and their Ten-Year JGB yields 1.56%.
  3. clacy


    It confuses me a little as well. Maybe because there just isn't anything else that people feel good about????

    Real estate.......nope

    maybe people fee like the commodity bubble will be bursting soon.
  4. BTW: How is Westside real estate holding up? Also, Is Pico sort of a dividing line? AND if you could be so kind, those hi-rises on the Wilshire Corridor and CC seem fairly priced. Are the assessments real high? Is it hip to live in those buildings?

  5. The Federal Reserve is buying treasuries on the open market.
  6. jasonjm


    yes PICO is the dividing line in a big way, actually north of pico by one block....

    West LA real estate is holding up very well. If its down at all, I would say 5% from the peak. It's being driven up by 2 things

    1) large investment coming into century city
    2) gas prices, west LA is the most central location in whole of LA to live.

    There are still houses in west LA going within 1 day of being put on market, and in mini bidding wars between 2 or 3 buyers. Have yet to see an outright foreclosure in this neighborhood.

    The higher end areas are definitely somewhat hit from what I can see, bel air and the likes, the homes there in the 4 million range are down about 15 to 20%.

    The super expensive homes havent budged ($10 mil +)

    as for the corridor, prices on the new construction and new CC condos are really huge.

    One of my clients just bought a wilshire corridor condo for about $8 million, her monthly HOD are about $3200 per month.... hehehe

    The truth of the matter is that it is just getting ever more expensive to build I guess.
  7. jasonjm


    well for them its not the debt thats the issue, its the deflation....

    if we get deflation, then anyone piling into long term notes is going to be right and get rewarded.
  8. I honestly believe that people buying long term U.S. treasuries are either clinically insane, or, foreign governments dependent upon the U.S. as a massive net importer of their GDP/GNP.

    I really don't see how, even if one assumes short term rates will remain low, one can enter into a long note with a low yield given the red hot inflation we're seeing.

    Maybe individual investors believe incredible deflation is on the way?
  9. rates can get marginally lower, 4% on the 30 year is the floor most long term players are looking to break. This creates a technical buying opportunity. Its the markets way of forcing anyone who is short government bonds to buy at the highs/cover, taking a loss. Its psychologically compelling level. Plus a deflationary wave benefits US government to service debt easier. US behind the scenes wants a massive deflationary spiral, so that our bonds are gobbled up. Administration is trying to create another 'Japan'...

    It plays a role in the global slowdown being engineered.
  10. Well of course not Jason. It's not like gas and food prices are lower in Japan!!!

    When they talk about deflation they mean the same deflation as here. Asset deflation. But as far as commodity inflation? Global babe.
    #10     Jul 15, 2008