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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chispas who wrote (98460)	6/10/2009 3:44:30 PM
From: Chispas	Read Replies (1) \| Respond to of 116555

"US government bond yields surge" . Financial Times, June 10 2009 20:23 ....................................................................................................................................................... US bond yields surged higher on Wednesday with the benchmark 10-year Treasury note hitting the key 4 per cent level at one stage after a government bond auction sparked fears that the cost of financing the record levels of US debt could threaten the economic recovery. The Treasury was forced to offer attractive yields of up to 3.99 per cent on the $19bn auction of 10-year bonds to lure investors, a much higher level than expected by markets. The auction was one of many offerings this week aimed at raising $65bn. The government is scheduled to sell $11bn of 30-year securities on Thursday. In reaction to the auction results, the yield on the 10-year note, which moves inversely to prices, hit 4 per cent for the first time in eight months. The yields rose above those of the UK. Investors have become increasingly worried that rising bond yields, caused by worries over the vast amount of debt issuance this year, could stall the revival as they force up the cost of mortgages and lending to corporates. Analysts say the government may borrow $3,250bn in the fiscal year ending on September 30, almost four times the $892bn in 2008. The budget deficit is projected to increase to $1,850bn this year. Jay Mueller, of Wells Fargo, said: “There are an awful lot of Treasuries being auctioned and there are going to be more and more and more.” Dominic Konstam, head of interest rate strategy at Credit Suisse, said: “It was not a slam dunk strong auction and some people were unnerved by the yield level.” E. William Stone, chief investment strategist for wealth management at PNC Financial Services group, said: “If you have less takers, the yield has to come up to get more people interested. It begins to affect the economy and smother the still fragile recovery.” Treasuries sold off across the curve, with yields on 30-year bonds rising to 4.77 per cent, the highest in a year. Equity investors also worried higher prices would fuel inflation and dent an economic recovery. The S&P 500 index was down 1.16 per cent by midday in New York. Separately, in its latest Beige Book survey of the economy, the Federal Reserve said US economic conditions were weak or got worse in May, but some areas of the country saw signs the contraction was moderating. ......................................................................................................................................................... ft.com