30-Year Treasury Bond Collapses
Horrific auction results sent the long bond down more than 2 points, last yielding 4.27, highest since november.
This will be a monthly event, fasten your seat belts. Odds on, on a fail some time this year.
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May 7th, 2009 at 9:16 pm
I don’t know if I am interpreting this correctly or not but, doesn’t this imply either
1) lack of faith in the US’s ability to pay it’s bonds back in 30yrs
or
2) lack of confidence in the demand for the bond in the near term
Which can imply…
-C
May 7th, 2009 at 9:22 pm
I would say simply: Over supply, the market is drowning in treasury paper and if they want to borrow more they will have to pay up.
May 8th, 2009 at 2:37 am
Does this also mean that US is failing to fund its various social programs (where perfectly able people abuse the system by pretending to be disabled) and its enormous deficit?
Does this also mean that the Dollar is doomed and that people should buy TBT and puts on TLT??
May 8th, 2009 at 3:38 am
The Fed didn’t do any buying today, which I think was ominous with the employment report coming out tomorrow. It’s possible that the Fed sat on the sidelines today because it knows the employment report is weak, and there will be plenty of buying tomorrow.
But regardless, I think you’re right that it’s mostly just over-supply. The Treasury auctions have been relentless (over $70bn this week alone?). We live in interesting times, that’s for sure.
May 8th, 2009 at 9:23 am
given china’s concern over its USD exposure, its probably not as keen a participant at US bond auctions as before
May 8th, 2009 at 2:59 pm
The rise in T-Bill prices is not about default risk, and it’s not about difficulty funding programs; it’s about inflation expectations.
As the size of the US debt and the quantity of “high powered money” (M1) increase, so do formal models of inflation expectations, and hence, so do the bond models used by various buyers of treasuries.
May 8th, 2009 at 8:17 pm
Thanks for the opinions folks. Here’s more bonds naivete from me. Perhaps these questions will help others too…
Let me see if this makes sense:
If people expect inflation to go up – as most do it seems – they would NOT want to buy bonds at a low yield (low interest rate), because they feel they wont be able to sell them to another trader in the near future, due to a prediction that interest rates will be higher for newly issued bonds in the future.
Is that right?
btw. “Inflatulator” is a hilarious username!
-C