Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Mike Johnston who wrote (51412)	1/25/2006 5:25:57 PM
From: Crimson Ghost	Read Replies (3) \| Respond to of 110194

Gov't printing USED to be bearish for bonds. But with the bond vigilantes in suspended animation government printing is ow bullish for bonds by providing a flood of liquidity. But woe to the markets when the bond vigilantes come back to life.

To: Mike Johnston who wrote (51412)	1/25/2006 5:31:16 PM
From: shades	Respond to of 110194

No sane or well informed person would invest in Treasurys below the rate of inflation, as is the case now. I thought russ was buying them?? I thought it was required by the CONSTITUTION that the gubbment had to pay them - but they could stop paying social programs - they could sieze gold - they could do LOTS of things - but they have to pay thier debt? The wealthy that had money in the depression bought government debt and saved thier butt I read. J Canada Bonds Slump Sharply Along With US Treasurys . TORONTO (Dow Jones)--Canadian bonds slumped sharply along with U.S. Treasurys on Wednesday as that market confronted the prospect of an extended wave of new supply. While most of the downward pressure originated from the U.S., the domestic market also saw significant new supply on Wednesday. 2.75s 2007 98.09 dn 0.04 3.84% vs 3.81% 4.00s 2010 100.07 dn 0.26 3.98% vs 3.92% 4.50s 2015 102.96 dn 0.50 4.12% vs 4.05% 5.75s 2033 124.99 dn 0.88 4.20% vs 4.16% 10-Yr Spread To U.S. 10-Yr: -36 vs -34 MAR 06 113.43 dn 0.53 volume 29,182 "It seems like this is more a function of what's going on in the U.S. than domestically," said Michael Le, fixed-income specialist at JP Morgan Canada. "I think the weakness in Treasurys is mainly driven by the unprecedented amount of supply that we're expecting over the coming weeks, and obviously the market has to price in some concession for that," Le said. On Wednesday, the U.S. Treasury Department sold $22 billion in two-year notes at a high rate of 4.427% and at a bid-to-cover ratio of 2.11, the lowest since April 2005. Just before the sale, the when-issued two-year was quoted at 4.43%. The indirect bid, a classification of buyers outside primary dealers, was a tepid 25.6%, the lowest since April 2005 and under market expectations of around 30%. In December, the two-year indirect bid was 31% and the average for 2005 was 35%. "That suggests maybe foreign demand for Treasurys isn't as robust as it was before," Le said. He said the U.S. market also faces quarterly refunding in about two weeks. Supply will continue to be an important factor in bond markets, said Le. Canadian bonds outperformed U.S. Treasurys on Wednesday, as they typically do in times of general bond market declines. There were no significant data releases or other market moving developments in Canada on Wednesday. On Thursday, the Bank of Canada will release its monetary policy report update. Le said market developments on Wednesday didn't reflect positioning in advance of the bank's policy update. "I don't think today's market movement is really a bet on that. I think it's more driven by what's going on in the U.S. market," he said. JP Morgan is expecting modest changes from the last monetary policy report, including a revision of the core inflation forecast mentioned in the bank's policy statement on Tuesday when it boosted the overnight target rate by 25 basis points to 3.50%. In its statement, the central bank said CPI and core inflation should return to the 2% target by the first half of 2007. In its October policy report, it forecast they would return to 2% in the second half of 2006. JP Morgan doesn't expect any substantial change in the Bank of Canada's growth forecast. In domestic supply, the Province of Quebec issued a C$500 million bond with a 4.50% coupon that matures on Dec. 1, 2016, at a price of 99.757 and a yield of 4.528%, for a spread of 41.5 basis points over the 4.00% Government of Canada bond maturing in 2016. American Express Canada Credit Corp. priced a new medium-term note issue of C$500 million that carries a 4.24% coupon and matures on Jan. 27, 2009, at 99.98 for a yield of 4.247% and a spread of 37.1 basis points over the 4.25% Government of Canada bond maturing in 2008, Thomson IFR Bonddata said. Talisman Energy priced an issue of C$350 million of bonds carrying a 4.44% coupon that mature on Jan. 27, 2011, at 99.991 for a yield of 4.442% and a spread of 52 basis points over the government curve, Thomson said.

To: Mike Johnston who wrote (51412)	1/25/2006 5:41:32 PM
From: Les H	Read Replies (1) \| Respond to of 110194

Fact #5 The Federal Reserve lowers short terms rates much lower than the prevailing yields on bonds and makes known to the investment community that the rates will be kept low and that there will be ample liquidity provided to purchase the bonds. Inflation expectations are irrelevant in this case. Alan's Secrets finpipe.com

To: Mike Johnston who wrote (51412)	1/25/2006 6:02:54 PM
From: GraceZ	Respond to of 110194

I don't know, if I was running a central bank in a place that has had interest rates approaching zero for almost a decade, treasury bonds at these rates might not look like such a stupid place to park savings. It would have been difficult to impossible to match the average return (considering the risk) I've gotten in the last eighteen years holding bonds with some other asset. Put another way, shorting them has been painful to say the least: finance.yahoo.com Of course, past performance is no guarantee of future returns. You forget that the world's economies haven't simply had an explosion of currency, but an explosion of stuff (factories, houses, plants, offices, capital equipment, etc) to offset all that money.