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Pimco Dumps All U.S. Treasury Bonds, Six Reasons Why They Got it Wrong Interest-Rates / US Bonds Mar 10, 2011 - 12:43 PM By: Mike Shedlock Pimco's Bill Gross has been dumping US government debt in favor of other alternatives including emerging-market opportunities. Looking ahead, I think it's more likely to be a bullish setup for treasuries than not. First, please consider the news. Bloomberg reports Pimco’s Gross Eliminates Government Debt From Total Return Fund Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the...

The signs of currency devaluation are all around us. Yesterday (Feb. 4th) commodities surged. Gold surged too. Are we really supposed to believe there is that much extra demand for commodities and gold, or their supply that restricted, that prices have been positively skyrocketing these last few months? Of course not. What has been happening is a devaluation in the underlying currency these commodities are priced in, the US Dollar. Currency depreciation can be tough to spot in an environment such as the current one, as most people will look for currencies to appreciate vs other currencies. What they are...

There is an old adage on Wall Street: no one rings a bell to signal a market top or bottom. Yet, I have found that bells do ring; it’s just that few people know exactly what sound to listen for. Perhaps the biggest and most liquid of all markets is for US government bonds. That market has been rallying for almost thirty years. The bull can be traced back to 1981, when Treasury bond yields peaked at about 15%. At that time, high inflation and a weakening dollar had justifiably squelched demand for Treasuries. Even the ultra-high interest rates were...

As the yield on the 10-year Treasury hits a six month high, you can almost hear all the doors slamming over in refi land. While you'd think most borrowers had already refinanced their loans to take advantage of the recent record-low interest rates, many have actually not, and their opportunity is fast falling. Refinance applications have fallen steadily since the first week in October, as mortgage rates began to rise. Now a $500 billion block of loans has become "clearly not refinanceable" according to Deutsche Bank. "The mortgage rate for a high concentration of 30-year borrowers clusters just below 5.00...

<p>Federal Reserve Chairman Ben Bernanke this Sunday will make his second appearance on 60 Minutes, defending the central bank's controversial $600 billion bond buying program.</p> <p>And he doesn't rule out the possibility that more could be on the way.</p> <p>"He explains why the Fed announced its intention to buy $600 billion in Treasury securities, defending against charges the move will lead to inflation and not ruling out the purchase of more," CBS said Friday.</p>

Round two of the economic crime of the century has begun. On January 12, Lawrence Summers, President Obama's designee to become director of his National Economic Council, sent a letter to congressional majority and minority leaders seeking the second half of the $750 billion approved by Congress last October.   Citing Obama's economic speech of January 8, Summers wrote: "As the President-elect recently stated, 'we start 2009 in the midst of a crisis unlike any other we have seen in our lifetime.'" As you no doubt recall, last September Congress, fearing the wrath of constituents, rejected a bailout scheme put together...

The Fed Underwrites Asset Explosion By Frederick Sheehan 10/30/10 North Weymouth, Massachusetts “That the economists…can explain neither prices nor the rate of interest nor even agree what money is reminds us that we are dealing with belief not science.” – James Buchan, Frozen Desire (1997) The Federal Reserve is in disarray. Unsure of whether its QE2 strategy (quantitative easing – second round) should be tabled (see speeches of Thomas Hoenig, president of the Kansas City Federal Reserve Bank) or if it should pump $10 trillion into the economy (the unsolicited advice from economic columnist Paul Krugman), the New York Federal...

Here's What It Means That The Interest Rate Was Negative On The TIPS Auction Today Gregory White Oct. 25, 2010, 2:53 PM Image: AP Today's TIPS auction came in negative for the first time ever, with 5-year TIPS yielding negative 0.55%. TIPS are Treasury Inflation Protected Securities. The idea is you buy this version of a Treasury and it is hedged against inflation, with the CPI as the judge. It would seem that a negative TIPS number means deflation in the short term. But that's not quite true. What it means is that investors are betting the principal paid out...

China’s central bank unexpectedly announced Tuesday that it would raise interest rates for the first time in nearly three years, apparently in the hopes of dampening inflation and cooling off this country’s hot property market. The move had an immediate effect on markets worldwide, sending stocks lower on exchanges in Europe and the United States as investors weighed the effect on China’s continued economic growth and its ability to serve as an engine for a global recovery. The major Wall Street stock indexes were down sharply. Oil prices, also sensitive to the world economic outlook, fell by more than 2...

A Plunge Into A Monetary No Man’s Land Interest-Rates / US Interest Rates Oct 14, 2010 - 08:26 AM By: Bob Chapman The question keeps swirling around regarding the Fed and just how much Treasury paper they can buy from the market under current rules. Our guess is about $1.7 trillion. A good part of that may well be in notes, which will probably keep long dated rates low. On the other hand they may increase the current limit, and buy everything in sight. That probably means the 10-year T-note could fall from its current level of 2.50% yield to...

Why The Lowest 30-Yr Fixed Mortgage Rate In History Is A Bullish Sign Scott Grannis, Calafia Beach Pundit Sep. 22, 2010, 3:51 PM Thanks to 2.5% yields on 10-yr Treasuries and the ongoing improvement in the efficiency and liquidity of the mortgage-backed securities market (which has resulted in a tightening of the spread between conforming and jumbo rates), homebuyers today can take advantage of the lowest 30-yr fixed-rate mortgages in history, whether for a conforming or a jumbo loan. One reason rates are so low is that demand for mortgage loans is also relatively low, as reflected in the above...

U.S. Monetary System Is In Serious Trouble Interest-Rates / US Bonds Sep 11, 2010 - 01:20 PM By: Bob Chapman There is no question the US monetary system is in serious trouble and the situation continues to deteriorate. The smug elitist owners of the system are not getting the desired results and there is great consternation among the players. Since 1913 in running US monetary policy the Fed has had one recession after another and two depressions. The second one is the one we are now in. The Fed’s creation was mainly to end recessions and depressions, something obviously they...

The Obama administration's proposal to allow companies to immediately write off 100 percent of new capital investment expenses through 2011 may not be as effective at jump-starting the economy as hoped. Businesses now deduct capital expenses over years, according to various depreciation schedules embedded in the tax code.The Obama administration would let them take the deductions immediately. The hope is that this will prompt companies to stop "hoarding" cash and start spending on investments. While it's tempting to applaud almost any reduction in the tax burden on American businesses, we're not sure this plan will work as advertised. In fact,...

TIPS On Expected Inflation: A Unique Dividends Buying OpportunityDirk van Dijk, CFA by: Zacks.com September 08, 2010 Interest rates have three major parts. The first is what is known as the real interest rate, or how much the market is willing to pay you to defer your consumption of goods and services into the future. The second part is an expected rate of inflation. After all, if you want to defer buying a car today so you can buy a better car in the future, it will not help you much if you earn 5% per year on your money...

Did The Scary Bond Bubble Just Pop? The Pragmatic Capitalist Sep. 6, 2010, 11:49 AM Interest rates have moved a whopping 20 bps in recent weeks and the bond bubble theorists are ready to pop the champagne. Not so fast there. I did a little research looking at the only period in US history when bond yields were this low and the macro environment was even remotely similar. If you hop in your time machine back to the 1930′s the environment was eerily similar. Deflation risks abound, low yields, floundering economy, high unemployment, private sector debt bubble, etc. It’s impossible...

Quantitative Easing QE2, Debt Created Out of Thin Air, Banking Crisis Worsens Interest-Rates / Quantitative Easing Sep 04, 2010 - 07:20 AM By: Bob Chapman In a futile attempt to keep the economic and financial system afloat, QE2 is underway. It began in early June as banks changed the rules for awarding loans. Their efforts over the past few months have only met with moderate success. Banks had cut back lending by some 25% over the past 16 months mainly to small and medium-sized companies. In the process the economy slowed down markedly and unemployment shot up to levels not...

The Federal Reserve is undertaking a "dangerous gamble" by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, a top Federal Reserve official said on Friday. "To be clear, I am not advocating a tight monetary policy," Kansas City Reserve Bank President Thomas Hoenig said in the text of a speech to the Lincoln, Nebraska, Chamber of Commerce. "I am advocating a policy that remains accommodative but slowly firms as the economy itself expands and moves toward more balance." Hoenig has been the lone dissenter on the Fed's policy-setting...

The Fed meets today against an economic backdrop that is "unusually uncertain," as Ben Bernanke put it last month Given the economy's recent deceleration and comments from various Fed-heads, many market players are expecting and hoping the Fed today at least hints at more "tools" it can use to spur growth and hiring. But not longtime Fed watcher Richard Suttmeier, chief market strategist at ValuEngine.com. "I think they're talk about what they might do - quantitative easing if they need to - but I sure hope they don't." Given the "unusually uncertain" backdrop Bernanke identified, Suttmeier believes the Fed is...

<p>Right now, one of the core questions perplexing markets is how U.S. treasury rates on long term debt can remain so low, even though the U.S. government continues to add more and more debt to the supply.</p> <p>The simple answer is that right now, the demand for that debt continues to outpace supply, reducing interest rates.</p>

The Federal Reserve has another problem -- it just doesn't know it yet. The Fed didn't make any change to the interest rates it controls at the policy-making Open Market Committee meeting yesterday and said "inflation is likely to be subdued for some time." Well, maybe not for long -- at least as far as the government's statistics are concerned. Two years ago this column broke the news that something was amiss in the government's inflation reports, particularly the closely watched Consumer Price Index. In a column on May 20, 2008, I quoted a top government economist who helped put...