Lack Of Interest In US Treasury Action!

On CNBC: Weak Treasury Auctions Raise Worries About US Debt Burden

• The U.S. Treasury sold $39 billion in five-year debt Wednesday in an auction that drew poor demand, raising worries over the cost of financing the government's burgeoning budget deficit.
  
  It was the second lackluster showing in as many days, convincing analysts that the stellar results of debt auctions just a few weeks ago were a fluke and that Thursday's $28 billion seven-year offering could suffer a similar fate....

Concerns and worries.

Do see this posting also: Who Is Going To Lend US Money To Fund Its $2 Trillion Deficit

2-Year US Treasury Yield Soars

The soaring 2 year yields!!!!


Also see: And The Topsy Turvy Markets Strikes Again

Getting Burned In US Treasury Notes And Bonds

On Reuters: Treasury bloodbath soaks top fund managers

• NEW YORK (Reuters) - Investors have been blindsided by one financial catastrophe after another over the last 18 months, but throughout the tumult, the government bond market has been their friend.
  
  Until now.
  
  A brutal drop in long-dated Treasury prices has caught even the best money managers off guard -- in some cases wiping out as much as 60 percent of the gains they booked in last year's huge rally in U.S. Treasuries.

Blindsided by one financial catastrophe after another... kinda agree.

09 December 2008, Tips: How To Make 13 cents In 3 Months!!!!

• Yields on two-, 10- and 30-year securities declined last week to the lowest levels since the Treasury began regular sales of the debt after a report showed U.S. employers eliminated jobs in November at the fastest pace in 34 years and the Fed contemplated buying U.S. debt as the recession deepened.
  
  President-elect Barack Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs in the biggest public-works spending package since the 1950s.
  
  The return to investors is 0.005 percent for the three- month bills, with a $10,000 bill selling for $9,999.87. The return to investors is 0.3 percent for the six-month bills, with a $10,000 bill selling for $9,984.83.

A day later, 10 December 2008 Zero! US T-Bills Fall To Zero!

• "There's still a ton of fear," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "People are now paying the government to take their money. Something is wrong."

The following day, 11 December 2008, Bill Gross Says T-Bill At Zero Is Overvalue And Has No Returns

No returns! Those two words says it all!

The article on Reuters continues...

• The Vanguard Group, Fidelity Investments, T. Rowe Price and Hoisington Investment Management have seen their government funds down anywhere between 10 percent and 30 percent, as record amounts of debt flood the market to pay for the swelling budget deficit.
  
  What's stunning about the portfolio declines is the swift plunge in Treasury prices within a short period of time despite the Federal Reserve's buyback purchases intended to hold down interest rates. Benchmark 10-year Treasury yields have surged to levels not seen in more than six months, resulting in meaningful losses for many portfolios.
  
  The 10-year T-note and 30-year Treasury bond are down 8.58 percent and 24 percent, respectively, in terms of price for the year to date.
  
  "If I were clairvoyant and knew we were going to have a sell-off of this magnitude, I would've been all in cash, but I'm not," said Van Hoisington, whose flagship Wasatch-Hoisington U.S. Treasury Fund is down more than 20 percent.
  
  To be fair, not all Treasury-oriented funds like Hoisington's represent an expression of a firm's macro view of economic growth or lackthereof. Some bond funds, such as the Vanguard Extended Duration Treasury Index Institutional, hold Treasuries for actuarial reasons.
  
  SOME BULLS SMILE THROUGH THE PAIN
  
  Even so, the losses are massive. Some of the rise in yields and slide in Treasury prices is due to investors' appetite for riskier fare like stocks, junk bonds and corporate debt, which have been performing well on signs the recession is easing.
  
  Indeed, for much of 2008 and earlier this year, investors piled into U.S. government debt during the credit crisis, sending yields to historic lows and triggering talk of a bubble similar to that of the Nasdaq's Internet-led bubble, which expanded in the late 1990s and burst in March 2000.
  
  But there also have been concerns about America's long-term financial health, which has set in motion a huge domino effect -- leading money managers such as Hoisington to stay bullish on Treasuries.
  
  "We ain't seen nothing yet in terms of the gazillion amount of Treasuries coming to fund our stimulus programs," said Dan Fuss, vice chairman of Loomis Sayles, which oversees more than $107.7 billion in assets.
  
  UNITED STATES' AAA VULNERABLE
  
  On May 21, Moody's Investors Service said while it is comfortable with America's AAA debt rating, it is not guaranteed forever against the backdrop of its deteriorating fiscal position. That helped exacerbate market fears that the United States remains ever more vulnerable to lose its coveted triple-A rating with its need to borrow $2 trillion -- or 14 percent of the country's total economic output and more than twice the record of 6 percent set in 1983.
  
  That also has set off a chain reaction, notably with the so-called "bond vigilantes." Veteran Wall Street strategist Ed Yardeni coined the term "bond vigilantes" to describe the huge appetite for yield of investors in the 1980s, who got burned in the '70s; these investors demanded higher yields to compensate for perceived risks of inflation and budget deficits.
  
  The phenomenon seems premature to some investors in Treasuries.
  
  "If zero growth is gonna result in inflation, it's a new economic paradigm as far as I'm concerned," Hoisington said.
  
  His fund was up an astounding 37.77 percent in 2008.
  
  "We do not have a forecast of runaway growth, nor does the Fed," added Brian Brennan, manager of the T. Rowe Price U.S. Treasury Long-Term bond fund, which is down nearly 11 percent. Conversely, his fund was up more than 23 percent last year.
  
  The standout of the crowd, however, is Vanguard. Its Extended Duration fund, which is down over 33 percent so far this year, "is not an expression of our macro call," Ken Volpert, head of the Taxable Bond Group at The Vanguard Group, where he oversees about $200 billion in assets, told Reuters.
  
  Volpert said the fund, which was up 55.52 percent in 2008, is primarily intended for pension plans and other institutional investors that want to closely match long-term liabilities with a portfolio of U.S. Treasury securities of similar long-term duration. He added that credit conditions have improved dramatically and confidence has come back into the markets and economy to feed the belief in recovery.
  
  Even so, "somebody lost their shirt ... 33 percent is no small chunk of change," said Jeff Tjornehoj, research manager at Lipper Inc, a funds research firm owned by Thomson Reuters.

On NYTimes, Treasuries and Stocks, in a Role Reversal

• Many investors who moved to the sidelines in the debacle of 2008 have begun to return to the stock market. “Investors don’t like to be left behind in any rally,” said Henry Kaufman, the veteran Wall Street economist. “The juices are beginning to work, and that’s a good thing.”
  
  Even in a week when General Motors, a former icon of American industry, went into bankruptcy, the stock market took the bad news in stride.
  
  Still, recent reversals in the Treasury market appear to underscore the continuing fragility of the stock market and of the global economy. Rising government bond rates could choke off an incipient recovery, particularly in the housing market, where mortgage rates are linked to Treasury yields.
  
  With the government forced to sell enormous quantities of bonds to finance its fiscal stimulus and financial rescue operations, Treasury yields have risen sharply since the beginning of the year, and prices, which move in the opposite direction, have plummeted
  
  ..........
  
  Amid gains like this, the turmoil in the Treasury market is glaring. Individual investors who bought Treasury securities and government bond funds last year to buffer their portfolios have seen the price of their holdings decline sharply (though the government guarantees the full value of Treasury bonds that are held to maturity).
  
  Those losses shouldn’t have been entirely surprising, though. After gaining so much in value, Treasuries were bound to fall, many analysts warned, and fall they did.
  
  The decline was caused by several factors, Dr. Kaufman said. These include anticipation of an economic recovery, the increasing supply of government debt, the mounting fiscal deficit, and skepticism about the Federal Reserve’s huge intervention. “The market is testing the Fed’s intentions and desires,” he said.

Here are the 6 month chart of UST (10-Year) and USB (30-Year). The plunge in UST is more drastic.

Here are the one year charts.

Gross: Double-Digit Returns Won't Be Back Soon

• Investors looking for double-digit returns from their holdings are going to have to learn to live in a different world for the next several years, bond kingpin Bill Gross said...

• "To the extent that investors previously thought that double-digit returns were there for the taking, were there for the having, in the forms of stocks for the long run or housing prices going up at double-digit rates, those asset classes will not show that type of appreciation," he said. "So bonds at stable incomes of 4 to 6 percent are an attractive situation."
  

Source: http://www.cnbc.com/id/29977297

Ten Trillion And Counting!

On PBS Frontline: Ten Trillion And Counting! (you have to go there to see the whole video!)

• The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury's debt auction room, where the U.S. government sells securities backed by the "full faith and credit of the United States." On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.
  
  Observers warn that the United States' reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. "You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows," Economist reporter Greg Ip tells FRONTLINE. "No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut."
  
  Yet more borrowing is exactly what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big.
  
  "That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back."

Here is a mini clip on youtube!

Bill Gross Says T-Bill At Zero Is Overvalue And Has No Returns

Here's Bill Gross commentary on the US T-Bill on Bloomberg.

• Pimco’s Bill Gross Regrets Not Buying Treasuries Amid Rally
  
  By Kathleen Hays and Michael J. Moore
  
  Dec. 10 (Bloomberg) -- Bill Gross, manager of the world’s biggest bond fund, says he regrets not buying Treasuries in what is shaping up to be the best year for U.S. government debt since 2000.
  
  “If we had our druthers, if we went back 12 months and we had known then what we know now, it would have been all invested in Treasuries,” Pacific Investment Management Co.’s Gross said in a Bloomberg Television interview from Newport Beach, California. “The question going forward is ‘Is it the winner over the next 12 to 24 months?’ We don’t think so.”
  
  Gross’ $129.5 billion Total Return Fund lost 2.1 percent in the three months through Sept. 30, compared with a 0.49 percent slump by the benchmark it uses to measure performance, according to Pimco’s Web site. Mortgage securities and investment-grade corporate debt accounted for 93 percent of its holdings. The Total Return Fund has not held Treasuries since last December.
  
  Treasuries of all maturities have returned 11.9 percent this year, according to Merrill Lynch & Co.’s U.S. Treasury Master Index, the best performance since the securities gained 13 percent in 2000.
  
  Gross said he continues to invest in corporate debt that is backed by the U.S. government, including the debt of American Express Co. and Sallie Mae Inc. The 64-year-old money manager also said Treasury Inflation Protected Securities represent “one of the best values” for investors seeking high-quality debt “once this delevering process winds down.”
  
  ‘Bubble Characteristics’
  
  “Treasuries have some bubble characteristics, certainly the Treasury bill does,” Gross said. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”
  
  The Treasury sold $30 billion of four-week bills yesterday through an auction at zero percent, while three-month bill rates turned negative for the first time since the U.S. began selling the debt in 1929.
  
  Gross expects the Federal Reserve to cut its target rate to 0.5 percent when policy makers meet next week and will likely signal that interest rates will remain low for a “considerable” period of time.
  
  “There’s some risk” for the dollar to weaken, said Gross. “Certainly the government and the Fed cannot continue to talk about trillions of dollars of expansion of the Fed’s balance sheet without the risk of the dollar going south. It is fair to say other economies are doing much the same thing. The dollar doesn’t have to go south if all the economies reflate at the same time.”
  
  Pimco, a unit of Munich-based Allianz SE, has about $790 billion in assets under management. The Total Return fund has gained 4.63 percent over the last five years, ranking it among the top one percent of all comparable funds, according to Bloomberg data.

Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asgkk4AucjU8

See also: Zero! US T-Bills Fall To Zero! and Tips: How To Make 13 cents In 3 Months!!!!

Tips: How To Make 13 cents In 3 Months!!!!

Publish on Bloomberg News: hreasury Sells Three-Month Bills at the Lowest Rate Since 1929

• By Michael J. Moore and Liz Capo McCormick
  
  Dec. 8 (Bloomberg) -- The Treasury sold $27 billion in three-month bills at the lowest rate since it starting auctioning the securities in 1929 amid record demand for the safety of U.S. debt during the worst financial crisis since the Great Depression.
  
  The bills were sold at a high discount rate of 0.005 percent, the Treasury said today in Washington. At last week’s auction, the bills drew a rate of 0.05 percent. The government received bids for the bills totaling more than triple the amount sold.
  
  “It’s all about capital preservation,” said John Canavan, a fixed-income analyst in Princeton, New Jersey, at Stone & McCarthy Research Associates. “People are afraid to put their money anywhere else so they aren’t terribly concerned about returns.”
  
  The Treasury also sold $27 billion in six-month bills at a high discount rate of 0.30 percent, the lowest since at least 1958. At last week’s auction, the six-month bills drew a rate of 0.43 percent.
  
  The rate on three-month bills peaked at 16.75 percent in May 1981, according to Federal Reserve data. Today’s rate was the lowest since the government began issuing the three-month bills in 1929, according to Stephen Meyerhardt, a spokesman for the Bureau of Public Debt in Washington.
  
  “There are also deflation concerns,” Canavan said. “Although we are at a near-zero yield, if you are expecting a deflationary environment over the next few months, then the real return is a little bit better.”
  
  Record Lows
  
  Yields on two-, 10- and 30-year securities declined last week to the lowest levels since the Treasury began regular sales of the debt after a report showed U.S. employers eliminated jobs in November at the fastest pace in 34 years and the Fed contemplated buying U.S. debt as the recession deepened.
  
  President-elect Barack Obama said Dec. 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs in the biggest public-works spending package since the 1950s.
  
  The return to investors is 0.005 percent for the three- month bills, with a $10,000 bill selling for $9,999.87. The return to investors is 0.3 percent for the six-month bills, with a $10,000 bill selling for $9,984.83.
  
  Treasury bills, which represent short-term government borrowing, are sold at a discount from maturity value. The amount paid to investors at maturity reflects the difference between the price paid for a bill and the par value.
  
  Indirect Bids
  
  The Treasury sells all its bills, notes and bonds on a single-price basis, in which securities are awarded at the highest rate needed to sell all the securities.
  
  In the three-month maturity, 82.98 percent of the bids that were filled came in at the high discount rate of 0.005 percent. The low rate submitted was zero percent, the median rate was zero percent, and the investment rate was 0.005 percent. The price was 99.998736.
  
  Indirect bidders, a group that includes foreign central banks, bought 57.6 percent of the three-month bills and 27.1 percent of the six-month bills. Primary dealers bought 42.1 percent of three-month bills and 72 percent of the six-month bills.

Waaaa.... 0.005 percent!!!!!!!

• The return to investors is 0.005 percent for the three- month bills, with a $10,000 bill selling for $9,999.87.

Let's see... for 3 months... 10,000 minus 9,984.87 equals a whopping 13 cents!!!

What a deal!

Just show me the Moola!!!!!