The Treasury Bond Market Revealed
Serious attention is being paid the the U.S. Treasury bond market in recent trading. When T-bonds show action, the dollar does also. If there is a decline in long-term Treasury bond prices, the dollar also plummets. According to the March 2009 report of the Fed's Flow of Funds, there was $14.5 trillion outstanding in agency securities, mortgage-backed securities and Treasury securities.
Many countries invest heavily in our country's debt as an investment and China is the top holder of U.S. bonds. Several top economists believe that if the purchase of U.S. bonds by China were to stop, the U.S. interest rates would increase to make our debt more attractive.
With the consequence of huge deficits and out of control government spending, the real value of U.S. Treasury securities are the focus of increased attention. China wants their assets safe and if any question of U.S. credibility would ensue, the pressure to liquidate a portion of their U.S. assets in self-survival mode may seem a likely option.
If other nations do not buy U.S. debt, the only other option is for the U.S. Treasury to buy Treasury securities and, thus, increase the money supply dramatically. In order to attract investors, rates of interest would have to rise. As what happens when the Federal Government begins to habitually buy Treasury bills, inflation will soar. In the current climate, the Fed bought over 500 billion dollars in mortgage-back securities.
During normal economic times, higher interest rates are a result of the central bank trying to ward off inflation associated with an increased money supply. Yet, there is less of a demand for Treasuries and higher interest rates to entice buyer demand is the only other option. However, this would only accelerate a declining economy deeper into a hole. Higher interest rates only place a greater burden on the population which results in more defaults on mortgage loans and higher consumer debt.
Washington's record breaking Treasury offerings to fund the deficit and the Fed buying the debt through its spinning out of dollar bills is staggering. The floodgate opened by the U.S. Treasury is pushing bond yields higher. Bill Gross, of PIMCO told Bloomberg, "The market is beginning to wonder who is going to be buying these bonds."
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China is the top holder of U.S. debt. Famous economist, Milton Friedman, said that the fate of a nation was ''inseparable from the fate of its currency''. Soaring rates of interest and inflation put an already fragile economy on the alert. Thus, the bond yields are higher as the government's deficit shows no sign of slowing. - 23218
Many countries invest heavily in our country's debt as an investment and China is the top holder of U.S. bonds. Several top economists believe that if the purchase of U.S. bonds by China were to stop, the U.S. interest rates would increase to make our debt more attractive.
With the consequence of huge deficits and out of control government spending, the real value of U.S. Treasury securities are the focus of increased attention. China wants their assets safe and if any question of U.S. credibility would ensue, the pressure to liquidate a portion of their U.S. assets in self-survival mode may seem a likely option.
If other nations do not buy U.S. debt, the only other option is for the U.S. Treasury to buy Treasury securities and, thus, increase the money supply dramatically. In order to attract investors, rates of interest would have to rise. As what happens when the Federal Government begins to habitually buy Treasury bills, inflation will soar. In the current climate, the Fed bought over 500 billion dollars in mortgage-back securities.
During normal economic times, higher interest rates are a result of the central bank trying to ward off inflation associated with an increased money supply. Yet, there is less of a demand for Treasuries and higher interest rates to entice buyer demand is the only other option. However, this would only accelerate a declining economy deeper into a hole. Higher interest rates only place a greater burden on the population which results in more defaults on mortgage loans and higher consumer debt.
Washington's record breaking Treasury offerings to fund the deficit and the Fed buying the debt through its spinning out of dollar bills is staggering. The floodgate opened by the U.S. Treasury is pushing bond yields higher. Bill Gross, of PIMCO told Bloomberg, "The market is beginning to wonder who is going to be buying these bonds."
A nation who spends in an out-of-control way can eventually destroy itself. A famous economist believed that inflation was a disease which could destroy a society if it wasn't stopped.
China is the top holder of U.S. debt. Famous economist, Milton Friedman, said that the fate of a nation was ''inseparable from the fate of its currency''. Soaring rates of interest and inflation put an already fragile economy on the alert. Thus, the bond yields are higher as the government's deficit shows no sign of slowing. - 23218
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posted by X - Men @ 3:00 AM
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