Posted on 03/30/2010 10:07:28 AM PDT by 444Flyer
The yield on 10-year Treasuries – the benchmark price of global capital – surged 30 basis points in just two days last week to over 3.9pc, the highest level since the Lehman crisis. Alan Greenspan, ex-head of the US Federal Reserve, said the abrupt move may be "the canary in the coal mine", a warning to Washington that it can no longer borrow with impunity. He said there is a "huge overhang of federal debt, which we have never seen before".
David Rosenberg at Gluskin Sheff said Treasury yields have ratcheted up 90 basis points since December in a "destabilising fashion", for the wrong reasons. Growth has not been strong enough to revive fears of inflation. Commodity prices peaked in January and US home sales have fallen for the last three months, pointing to a double-dip in the housing market.
Borrowing puts UK's AAA rating in danger after Budget 2009Mr Rosenberg said the yield spike recalls the move in the spring of 2007 just as the credit system started to unravel. "The question is how the equity market is going to handle this back-up in rates," he said.
The trigger for last week's sell-off was poor demand at Treasury auctions, linked to the passage of the Obama health care reform. Critics say it will add $1 trillion (£670bn) to America's debt over the next decade, a claim disputed fiercely by Democrats.
It is unclear whether China is selling US Treasuries after cutting its holdings for three months in a row, or what its motive may be. There are concerns that Beijing may be sending a coded message before the US Treasury rules next month on whether China is a "currency manipulator", though experts say China is clearly still buying dollar assets because it is holding down the yuan against the
(Excerpt) Read more at telegraph.co.uk ...
To quote that eminent theologian, The Reverand Jeremiah, “America’s chickens are coming home to roost.”
And we are clucked.
30 basis points isn’t bad!
I wouldn’t loan money for more than 1 year to Uncle Sam for less than 15%. I simply don’t trust that in 10, or especially 30 years, you will get the same amount back.
Hah, and if you do get it back, it will buy half or less what it does now.
One loaf of bread, please.............
Michelle, I'm going to the corner store for some cigs!...................
Greenspan stated a few days ago that if the 10 year rate on Treasuries hits 4% that is a negative indication for the long-term economic growth.
Market should be up 200+ points on this news.
I really don't believe O gets the correlation.
The problem for the democrats is that they cannot spin this to investors. The media may buy it, the public may buy it to an extent, but investors know it is crap and no amount of spin is going to bring investors to the table.
That’s right. Zer0 doesn’t care about the coal mine or the coal miners. He wants them gone anyway. So he says, “Screw the canary. I’ll just ignore it.”
The sooner the US goes default, despite arguments to the contrary, the better off we will be.
I have come to that conclusion also.
Stock up on food.
And keep some money on hand in case the banks close.
“Higher yields are the “canary in the mine,” Greenspan said in a March 26 interview on Bloomberg Television’s “Political Capital With Al Hunt.” The increases reflect concern over “this huge overhang of federal debt which we have never seen before,” he said. The budget deficit, which hit $1.4 trillion in fiscal 2009, will drive Treasury sales to a record $2.43 trillion this year, a February survey of 10 dealers showed. “Bonds have seen their best days,” Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., said in a March 25 interview ..... Greenspan’s Buffer America will use about 7 percent of tax revenue for debt payment in 2010 and almost 11 percent in 2013, while the U.K. is likely to spend 9 percent in 2013, rising to almost 12 percent under what Moody’s Investors Service describes as “adverse” scenarios. Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” Greenspan said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.” ..... Former Federal Reserve Chairman Alan Greenspan’s warning that rising yields on government debt will drive up American borrowing costs is resonating with the world’s biggest bond traders, who say this month’s losses in the market for U.S. Treasuries are just the beginning. .....
More...
Why the Bond Auction Fizzled: Fears of a 'Fiscal Train Wreck' - FR / CNBC, 2010 March 24, by Steve Liesman
The Jobs Puzzle Bernanke Can't Solve - CNBC / Reuters, 2010 March 28
If the U.S. economy does indeed show large job gains for March, it would pull ahead of the euro zone, which is expected to report on Wednesday that the jobless rate ticked up to 10 percent in February from 9.9 percent the prior month. The U.S. unemployment rate is at 9.7 percent, and the consensus view is that it will hold there in March. What happens after that is open for debate. Some economists think it will inch up again later this year, for a somewhat counter-intuitive reason. As the labor market improves, discouraged workers may decide to start looking for work again. Those who give up the search are not officially counted in the unemployment rate, but when they jump back into the labor pool they are. David Rosenberg, chief economist at money manager Gluskin Sheff in Toronto, is more concerned that the economy will weaken just as the Census jobs are disappearing. Government stimulus spending will be fading later this year, and the Fed may be cutting back on its extraordinary economic support. "I would be looking for a second-half growth relapse that sees the unemployment rate climb back to a new cycle high once the Census hiring effect subsides," Rosenberg said. ..... Government jobs are expected to account for the bulk of the growth, thanks to the once-a-decade Census, which requires taking on hundreds of thousands of temporary workers. While the jobs pay well ($22.00 an hour in San Francisco; $11.75 in Ames, Iowa,) they last only a few months. Bernanke and his central bank colleagues are well aware that Census hiring will skew readings, and have cautioned that unemployment will likely remain near 10 percent all year. .....
What are the ramifications of defaulting? Who’s hurt, who gains?
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