Treasury Notes Rise to Highest Since 2005 on Subprime Concern

[Sapiens]

http://www.bloomberg.com/apps/news?p...oRw&refer=home

The yield on two-year notes fell 19 basis points, or 0.19 percentage point, to 3.16 percent at 3:45 p.m. in New York, according to bond broker Cantor Fitzgerald LP. It touched 3.12 percent, the lowest since January 2005. The price of the 3 5/8 percent securities due in October 2009 rose 3/8, or $3.75 per $1,000 face amount, to 100 7/8.

Benchmark 10-year note yields decreased 11 basis points to 4.07 percent after touching 4.04 percent, the lowest since September 2005. They yielded 91 basis points more than two-year notes, the widest difference since January 2005. Yields move inversely to bond prices.

Steady as she goes Gents... Same for Gold. Do not get fooled by all the smoke and mirrors, defaulting mortgage loans shrink the monetary aggregate.

[Andreuccio]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

http://www.bloomberg.com/apps/news?p...oRw&refer=home




Steady as she goes Gents... Same for Gold. Do not get fooled by all the smoke and mirrors, defaulting mortgage loans shrink the monetary aggregate.

So all assets down?

[Sapiens]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

So all assets down?

No. PMs and T-bills up. Oil up until the supply demand curve breaks to restrained demand, due to credit contraction.

[Starving Steve]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

I should fall all over myself to buy US treasury debt that pays a negative real rate of return and now bears a subtantial risk of further dollar devaluation?

Am I reading this right? I should buy this crap, backed by nothing?

NOT. NO WAY!

I would better to take my chances with gold or silver, even platinum. Even $95 oil seems like a better bet than US treasury debt.

And then we have the laughable Bob Prechter idiots-- the Elliot Wave gang-- who think US paper money might somehow regain substantial value, just as the Japanese yen did in the late 1980s. But their entire thesis is ludicrace because the Federal Reserve is going to flood the banks with ultra-cheap money. This can not be anything but inflationary. ....And whatever money that the Fed doesn't print and inject into the banking system will be printed by the Bank of Japan and lent to Japanese banks at 0.5%, in turn, these banks will inject their funds (once converted from yen to dollars) into US banks.

So US banks will be re-funded, and the inflation will go on and on until the dollar is worth less and less and less. This is an old story.

Everyone knows the reflation story. Why repeat it?

So what is next from the U.S. Fed: another round of 1% nominal interest rates? I just can't wait!

Except that rather than get upset about this outrage, perhaps we had all better laugh at it, because it is hilarious.

[GRG55]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

No. PMs and T-bills up. Oil up until the supply demand curve breaks to restrained demand, due to credit contraction.

And food/grains/ag? Same sort of supply demand curve break scenario, or somethng else?

[Guest]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Starving Steve - Ouch! You are stepping on all of Sapien's sacred cows here! :rolleyes:

Sapiens likes to make "it will be thus" oracular statements, where half the significance is wrapped up within the spirit of enigma itself. I admit, it takes a little getting used to, especially when he's recommending "certificates of guaranteed confiscation".

[Sapiens]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Am I reading this right? I should buy this crap, backed by nothing?

Please explain how treasuries are not backed by anything?

What do you think the US natural resources are? Nothing? US Treasuries are backed by each and every productive American via the US power of taxation. They are backed by something.

[Milton Kuo]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

No. PMs and T-bills up. Oil up until the supply demand curve breaks to restrained demand, due to credit contraction.

Being that you feel that PMs will not go down, are you implying that there will be a flight to safety?

[Guest]

Fed has rarely been more restrictive than it is right now

By David Nichols - GOLD REPORT

This week equity markets zoomed up in the most powerful rally in five years, mostly due to direct signs from the Fed that further interest rate cuts are on the way. Fed Vice-Chairman Donald Kohn pretty much came right and told us that the Fed will continue to drop rates, and Chairman Ben Bernanke also dropped some not-so-subtle hints.

Declining interest rates tend to put downward pressure on a currency. This has certainly been the case with the dollar following the Fed's emergency discount rate cut back on August 17th. Check out what has happened to the Dollar Index since this cut.



The dollar has been on a one-way trip south. Further rate cuts are likely to put even more negative pressure on the dollar -- and have a positive effect on gold.
So how low will the Fed take interest rates? That's the trillion dollar question, and fortunately we have a pretty darn good way to predict this, thanks to research by Tom McClellan of the McClellan Market Report.
Tom has figured out that the Fed is really just reacting to the markets when it comes to setting interest rate targets. More specifically, the Fed's actions are tied to the yield on the 2-year note.
It works like this: when the Fed funds target rate is above the yield on the 2-year note, the Fed's policies are restrictive; when the Fed target rate is below the yield on the 2-year, the Fed's policies are stimulative.



Right now the yield on the 2-year note is 3.06%, and the Fed funds target rate is 4.50%.
That is a 144 basis point difference, nearly 6 quarter-point rate cuts!
Not only is the Fed behind the curve on dropping interest rates, they are way behind the curve.
The chart above, courtesy of McClellan Financial Publications, shows this spread between the 2-year note yield and the Fed funds target rate. It also shows that over the last decade the Fed has rarely been more restrictive than it is right now.
It's going to take a lot of rate cutting just to get back to neutral. And if the Fed decides to really try to stimulate growth, rates will need to drop well below 3.00%.
It's no coincidence that gold had a monstrous $200 one-way rally as the Fed started its rate-cutting campaign in August.



So if the Fed still needs to cut 1.50% just to take monetary policy to neutral, what will happen to gold?

I think it's going to send gold on another $200 upside move, to just under $1,000 per oz.
And I also think this rally is going to start right after this current short-term correction runs out of steam. Ideally we'll now see another quick and scary dump in gold, which is invariably the perfect lead-in to a massive rally phase.
I have a multiple fractal projections aligning at $940 on the big pattern in gold, so this level should act as a massive "attractor" for prices. I'm very confident that gold will reach up to this $940 target at some point in 2008, especially with the Fed poised and ready to take interest rates down and bludgeon the dollar even more.
In my Fractal Gold Report, we still have not received the all-clear to pile back into long positions in gold, as it looks like this correction needs to go down some more to find the perfect "slingshot level."
This is also why I was adamant that everybody book profits on the last trade up at the $832 target, as speculative markets like gold typically need more time to work off such huge gains.
The plan right now is to wait patiently for the tell-tale signs of a reversal, and to once again pile into a big long position when we get this needed confirmation that gold is once again ready to rocket higher.

________________

postscript : INFLATION ADJUSTED SILVER (for C1ue)

SILVER_IS_A_BARGAIN.png

[c1ue]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Lukester,

Is the graph adjusted via Shadowstats or official CPI?

I still have the 1000 oz of Au, by the way...

[Spartacus]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Lukester,

Is the graph adjusted via Shadowstats or official CPI?

I still have the 1000 oz of Au, by the way...

I think you mean Ag ... otherwise, can I be your friend? Buy you a beer?

[Guest]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

C1ue - is the chart CPI+lies adjusted ? - Straight answer is "I don't know" as to whether the chart is adjusted or not. Maybe we can ask Bart if he's got an overlay.

To my mind Silver bullion is the perfect levered play on gold, although admittedly it is quite "spirited" in a bull market. Own silver rather than any mining stocks, and you get to ignore mining stocks (a very good thing!) and own silver instead, which had almost the same performance as gold stocks in the last bull market.

I don't know about you, but I'm only interested in silver for the first measly 100% upside. I am keeping my expectations super-cautious, but doing that by scaling out earlier, not by keeping a small position. Makes sense to have the largest position you can tolerate at the start, and lighten it up quite early.

[Guest]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Oh yes, I missed that entirely. If it's 1000 ounces of AU, I think we all want to buy C1ue a beer (or two, or three, with a couple of shots of Jim Beam thrown in to jolly him up before we ask for a "small bridge loan"). :cool:

So how much do you want to charge for that big fat silver bar-bell now, eh C1ue? Are you thinking to trade it for 100 acres of prime tundra?

(P.S. I knew Spartacus would be around here sooner or later - you only need to mention silver and that guy wanders by to see what's up. Spartacus, although he will stoutly deny it, is very discreetly, a "silver-bug" :eek: , who might even open C1ue's eyes a little further to the possibilities of that "bar-bell" C1ue's been carrying around morosely like an albatross around his neck for the past decade).

[c1ue]

Re: Treasury Notes Rise to Highest Since 2005 on Subprime Concern

Au, Ag, what's $784K between friends