Interest rates on T-bills fall

[Sapiens]

http://www.baltimoresun.com/business...35,print.story

baltimoresun.com
Interest rates on T-bills fall
Associated Press

November 6, 2007

WASHINGTON

Interest rates on short-term Treasury securities fell in yesterday's auction, with rates on six-month bills dropping to the lowest level in more than two years.

The Treasury Department auctioned $20 billion in three-month bills at a discount rate of 3.550 percent, down from 3.920 percent last week. An additional $18 billion in six-month bills was auctioned at a discount rate of 3.780 percent, down from 3.945 percent last week.

The three-month rate was the lowest since three-month bills averaged 2.850 percent Aug. 20. The six-month rate was the lowest since these bills averaged 3.745 percent Sept. 26, 2005.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,910.26. A six-month bill sold for $9,808.90.

Separately, the Federal Reserve said yesterday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, fell to 3.93 percent last week from 3.97 percent the previous week.


Copyright © 2007, The Baltimore Sun

Gold Reaches 27-Year High on Dollar, Oil Records; Silver Gains

By Pham-Duy Nguyen

Nov. 6 (Bloomberg) -- Gold rose to the highest since 1980 as record oil prices and a slumping dollar increased concern that inflation will accelerate. Silver jumped to the highest in 26 years.

Oil surged as high as $97.10 a barrel in New York and the dollar extended its slide to the lowest ever against the euro, boosting the appeal of precious metals as an inflation hedge. Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, has risen 32 percent this year to a record 598 metric tons.

``The falling dollar is the very definition of inflation,'' said Chip Hanlon, president of Delta Global Advisors Inc. in Huntington Beach, California, which manages about $1.2 billion. ``A weak dollar makes the cost of living for all of us go higher and gold is the best hedge against that.''

Gold futures for December delivery rose $12.60, or 1.6 percent, to $823.40 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $827.20, the highest for a most-active contract since Jan. 21, 1980, the day gold reached a record $873. Gold has rallied 29 percent this year, heading for the seventh straight annual gain.

Silver futures for December delivery rose 59.5 cents, or 4 percent, to $15.38 an ounce in New York, after earlier reaching $15.54, the highest for a most-active contract since Jan. 21, 1981. Silver is up 19 percent this year.

Weakening Dollar

The dollar fell to $1.457 against the euro, the lowest ever, on speculation losses related to U.S. subprime-mortgage defaults will prompt the Federal Reserve to reduce interest rates for a third time this year.

Gold gained 23 percent last year when the dollar dropped 10 percent against the euro. The dollar is down 9.3 percent against the euro in 2007 and has fallen 3.9 percent since Sept. 18, when the Fed lowered the overnight lending rate for the first time in four years. The Fed cut rates again by 0.25 percentage point to 4.5 percent on Oct. 31.

Five of the past six bear markets for the U.S. currency have resulted in a gold rally. Interest-rate futures indicate investors believe there is a 64 percent chance the Fed will lower rates to 4.25 percent by Dec. 11, compared with a 6 percent chance a month ago.

``Everyone should keep accumulating gold and selling dollars,'' said James Turk, founder of GoldMoney.com, which had $237 million of gold and silver in storage for investors at the end of October.

$1,000 Prediction

Turk expects gold to breach $1,000 in 2008. He correctly predicted last year gold would rise above $800 in 2007. ``Gold remains cheap and the dollar is still way overvalued,'' he said.

Adjusted for inflation, gold is still below its all-time high. Based on 1980 dollars, the January 1980 record of $873 would be $2,185.68 today.

Gold priced in other currencies has also gained this year. Gold denominated in euros has gained 17 percent in 2007 while gold priced in yen climbed 24 percent. Gold reached a record 395.89 British pounds today.

``This gold market is up, up and away,'' said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``The dollar is going to keep skidding. We don't know if it's going to be a recession, inflation, stagflation. People want to buy gold.''

UBS AG today raised its one-month forecast to $850 from $700. National Bank Financial last week said gold would reach $900 in the next 12 months.

Dollar, Oil

``With the two external drivers of gold -- a weak U.S. dollar and strong oil -- together conspiring to lift the metal higher, we are now in range of a move to the all-time nominal high of $850,'' said UBS AG analyst John Reade.

Gold for immediate delivery in London rose $14.95, or 1.9 percent, to $821.45. The spot price has averaged $677.64 this year.

Crude-oil futures traded higher on concern demand will outpace supply. Gold reached its record in January 1980 after oil costs doubled in a year, sparking a surge in the rate of inflation to 14.8 percent in March 1980.

Still, some investors caution gold's rally since mid-August may be overdone.

``The dollar, oil and gold have moved too far too fast and are ripe for substantial corrections,'' said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp.

Speculative net-long positions on the Comex are near record highs. Hedge funds and other large speculators increased net- long positions, or bets prices will rise, to 198,606 contracts on the Comex as of Oct. 30, up from 186,304 a week earlier, according to the U.S. Commodity Futures Trading Commission.

The 14-day relative strength index for gold futures topped 80 today after staying above 70 for the past seven sessions. When gold's RSI last topped 80 on Oct. 1, the metal dropped $17.80 the next day.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net .

Last Updated: November 6, 2007 14:24 EST

[metalman]

Re: Interest rates on T-bills fall

http://www.baltimoresun.com/business...35,print.story

how can short rates fall to price in falling inflation while gold rises?

what did ej write here once about tsunamis? when the ocean goes out and the fish are flopping around on the ocean floor, don't walk out in your bathing suit to pick 'em up?

but which fish am i avoiding? too expensive tbills or too expensive gold?

this just in...
THE MARKETS: BONDS; Short-Term Treasury Prices Rise Amid Optimism on Inflation

Most Treasury securities rose in price yesterday on increasing optimism that the Federal Reserve will be successful in slowing growth enough to keep inflation from accelerating in the months ahead.
The specter of rising interest rates caused stock prices to slump, as some investors sold and beat a path to bonds, which also got added support from data showing that factory orders for durable goods fell 1.3 percent in January after posting a big gain in December.
Initial jobless claims, however, fell by 7,000 last week, to 278,000, more than expected. It was the second weekly drop, and suggests that the supply of labor is still shrinking.
The benchmark 30-year bond slipped 4/32 to a price of 10120/32 ; its yield, which moves in the opposite direction, rose to 6.13 percent, up one-hundredth of a percentage point from Wednesday.
But notes with shorter maturities showed strong gains. A 10-year note was up almost a half-point in price, to yield 6.36 percent, down from 6.41 percent on Wednesday.
Analysts noted that the report yesterday of the 1.3 percent decline in durable goods orders in January had been expected, but it did help to get the bond market off on a good note early in the session.
Donald Fine, chief market analyst at Chase Asset Management, said durable goods orders remained very strong; the January decline was almost offset by the upward revision to the December number.
Moreover, the orders are still a very good indicator that production in the coming months will continue to show its recent momentum. ''But the real story of the day in terms of the bond market's improvement was the flight to quality out of the stock market,'' Mr. Fine said.
''Market expectations for another round of Fed tightening at the March 21 Federal Open Market Committee meeting are becoming ubiquitous,'' Mr. Fine said, referring to the Federal Reserve panel that sets interest rate policy, ''in light of the booming economy and extremely low unemployment rate. The key issues now are timing and extent.''
Robert Pugliese, senior vice president and director of the fixed income department at J. W. Genesis Financial in Boca Raton, Fla., said that he thought the financial markets were captives of the Fed chairman, Alan Greenspan, the equity markets and the big hedge funds.
''While Mr. Greenspan may be the gatekeeper, the equity markets and the big hedge funds are dictating the prices and direction,'' Mr. Pugliese said. ''We are not value trading at this point. But if we're not at the low point in prices in the 5- to 10-year sectors, we're very close to it.''
In fact, in the municipal market, he said, long-term, tax-free AAA bonds can be bought that yield the same as government bonds. ''People are so mesmerized by the equity market and double-digit returns that it's going to take a while for investors to see the value in fixed-income products, because that's where some tremendous values are,'' Mr. Pugliese said.
Elsewhere, Honeywell International plans to sell $1 billion of 10-year global bonds through J. P. Morgan Securities and Salomon Smith Barney. The deal is expected to be priced at about 120 basis points more than Treasuries with a similar maturity.

oops. that was February 25, 2000

my mistake :rolleyes:

[Sapiens]

Re: Interest rates on T-bills fall

how can short rates fall to price in falling inflation while gold rises?

what did ej write here once about tsunamis? when the ocean goes out and the fish are flopping around on the ocean floor, don't walk out in your bathing suit to pick 'em up?

but which fish am i avoiding? too expensive tbills or too expensive gold?

metalman,

They are different tools. Right now staying liquid is very important. Gold will not make you "rich", it is used to preserve puchasing power. T-bills are used for access to immidiate liquidity in lieu of printed currency in a debt as "money" system where bankers' credit is monetized.

So in my opinion, they are not expensive, as far as the word "expensive" applies to their individual price as medium-of-exchange tools.

-Sapiens

[metalman]

Re: Interest rates on T-bills fall

metalman,

They are different tools. Right now staying liquid is very important. Gold will not make you "rich", it is used to preserve puchasing power. T-bills are used for access to immidiate liquidity in lieu of printed currency in a debt as "money" system where bankers' credit is monetized.

So in my opinion, they are not expensive, as far as the word "expensive" applies to their individual price as medium-of-exchange tools.

-Sapiens

that makes sense. thx. tbills for holding safe cash, gold for preserving wealth. got it.