Treasuries Getting Hit . . .

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Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 561
Treasuries Getting Hit . . .

. . . . is this the start of something or is it too early to tell if the bubble is being pricked?

http://bloomberg.com/apps/news?pid=20602007&sid=a5M8rP8jU8Jk&refer=govt_bonds

GDon's picture
GDon
Status: Bronze Member (Offline)
Joined: Apr 2 2008
Posts: 86
Re: Treasuries Getting Hit . . .

LYS -

Interesting...

Yes - in a rational world where people aren't forced to engage in trade (via military), or forced to follow "legal tender" trust in debt paper (via Bretton Woods/ military), there will come a time;  when after the 100th IOU, written to cover the 99th IOU, written to cover the 98th IOU, the "lender" (e.g., China) eventually begins to have little trust that our IOU's (FRN's/$USD/Treasuries) are really worth anything.

Ultimately, the bubble in Treasuries (and low yields, even negative!) created by everyone still playing with the same monopoly money to settle collapsing debt, eventually will begin to quit playing with the same phoney money.

At that point, there is real risk of US Debt Instrument defaults - as it is, the FED and Central Banks are the primary buyers, "propping" up that system.   When that happens, we can expect the yield curve to ratched "up", and interest rates will begin to pop up, before they eventually collapse.

Look at debt instruments from all 2nd and 3rd world nations - they all must pay a very high premium to continue borrowing.

So too, with Treasuries - eventually.

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
Joined: Apr 5 2008
Posts: 458
Re: Treasuries Getting Hit . . .

The federal government is the world's biggest debtor and its deficits have gone parabolic. It was only a matter of time when investors began to realize that treasuries are not the safe haven they thought they were. Add to that the other nations who are running out of surpluses with which to buy treasuries. The federal government is running out of credit. That leaves the printing presses.

Most important, the bond market is the biggest bubble of all by far. Godzilla takes Wall Street.

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