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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (16818)	1/28/2009 3:18:37 PM
From: Sam Citron	Read Replies (1) \| Respond to of 71454

Should have doubled up on the temporary dip in TBT Treasuries Drop as Fed Offers Little Guidance on Debt Purchases By Daniel Kruger and Molly Seltzer Jan. 28 (Bloomberg) -- Treasuries fell as the Federal Reserve provide little additional guidance on possible purchases of government debt and investors speculated President Barack Obama’s plans to boost the economy will reduce demand. Yields remained higher as policy makers left the benchmark interest rate as low as zero and reiterated that it’s prepared to purchase longer-term Treasury securities to resuscitate lending and the economy. The House of Representative is set to approve Obama’s proposed $816 billion stimulus package. “The fact that they didn’t mention it, or specifically state that they will employ that strategy, that’s why you’re seeing the long-end sell off here,” said Richard Schlanger, who helps manage $15 billion in fixed income securities at Pioneer Investments in Boston. “People were buying the rumor.” Thirty-year bond yields rose 11 basis points, or 0.11 percentage point, to 3.36 percent in New York at 2:35 p.m., according to BGCantor Market Data. The price of the 4.5 percent security maturing in May 2038 fell 2 12/32, or $23.75 per $1,000 face amount, to 121 6/32. The five-year note yield rose 9 basis points to 1.66 percent before the Treasury sells $30 billion of the securities tomorrow. The yield on the 10-year Treasury note increased 8 basis points to 2.61 percent. The Fed is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement after meeting in Washington. Corporate Debt Treasuries lost investors 1.6 percent this month, eroding a 14 percent gain from 2008 that was the most in 13 years, while corporate debt returned 1.8 percent, Merrill Lynch & Co. indexes show. Company bonds offer “terrific value,” said Fritz Meyer, senior market strategist in Houston at Invesco Aim Advisors Inc. The Federal Reserve, ending a two-day meeting, keep its target rate for overnight loans between banks in a range of zero to 0.25 percent, matching the median forecast of 46 economists surveyed by Bloomberg News. Fed Chairman Ben S. Bernanke trimmed the target rate for overnight loans between banks to a range of zero to 0.25 percent at the meeting on Dec. 16 to help unfreeze credit markets. “This environment calls for them to be more clear than ever and communicate what they’re doing,” said Carl Lantz, an interest-rate strategist in New York at Credit Suisse Securities USA LLC, one of 17 primary dealers that trade with the Fed. “The risk for them is that deflation expectations take hold. Since they can’t do anything observable like cutting the fed funds rate, they need to communicate concrete actions that they’ll take.” Negative Growth The U.S. economy will contract in the first half of 2009 and expand in the second, a Bloomberg survey of banks and securities companies shows. The Federal Deposit Insurance Corp. may run a proposed “bad bank” to buy toxic assets from lenders, two people familiar with the matter said. Obama lobbied lawmakers yesterday to win approval for his package of spending programs and tax reductions. Inflation expectations increased this month. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, was 83 basis points, the most since Nov. 14. The real yield, what investors get from 10-year notes after inflation, was 2.51 percent. Consumer prices increased 0.1 percent in 2008, after rising 4.1 percent the previous year. Treasuries climbed yesterday as demand rose at a record $40 billion two-year note auction. The auction attracted bids that were 2.69 times the securities offered, up from 2.13 times at a sale last month. Interbank Lending Government efforts to restore trading in credit markets that froze last year are beginning to show results, DB Advisors, the institutional asset management arm of Deutsche Bank AG, said in a report today. Markets for interbank lending, mortgages and commercial paper show “notable improvements,” economists led by Joshua Feinman in New York wrote. Deutsche Bank, the parent company, is another primary dealer. The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, shrank to as little as 98 basis points on Jan. 15 from 4.64 percentage points on Oct. 10. The narrowing began to reverse this month, pushing the spread out to 1.03 percentage points today. The London interbank offered rate, or Libor, for three- month dollar loans was 1.17 percent today, near a three-week high. It tumbled in the final months of 2008 from 4.82 percent in October.