I think this is the beginnings of an economy based on perpetual growth and fossil fuel energy running headlong into geological energy constraints. Basically I see an undulatory downward path for the rest of my life. From here out, I think any rallies in our economic condition are going to be met with spiking commodity prices that knock us right back down.
U.S. Treasuries this week fell the most since October as demand at two government debt auctions declined and reports showed the economy may be recovering from a fourth-quarter slowdown.
The slump preceded what may be the 14th straight increase by the Federal Reserve in its interest-rate target next week. The $32 billion of debt sold overshadowed a report showing the economy last quarter slowed more than forecast.
The auctions ``didn't go particularly well,'' said Thomas Atteberry, who manages $2.3 billion in fixed income assets at First Pacific Advisors in Los Angeles. The supply is ``not getting absorbed as efficiently'' as usual, he said.
Quote:
The class of bidders that includes foreign central banks bought $5.4 billion, or 25.6 percent, of the $22 billion of two- year notes sold on Jan. 25, the smallest share since April 2005. Foreigners owned 52 percent of the Treasury market in November, up from less than 35 percent four years earlier.
The lower level is alarming because in January 2004, foreigners bought $8.6 billion of the two-year notes sold that month. This week's result shows some opted not to replace the maturing notes, Cloherty said.
``That has people spooked about the upcoming refunding,'' he said, referring to the quarterly sales.
The Treasury intends to borrow a record $171 billion this quarter. The Treasury probably will sell $20 billion of three- year notes, $13 billion of 10-year notes, and $15 billion of 30- year bonds in the first sale of them since 2001, according to an estimate by Wrightson ICAP, the independent research unit of ICAP Plc, the largest inter-dealer broker.
The most recent three-year note sale totaled $18 billion. The last quarterly sale of 10-year notes was $13 billion. The total may exceed the $48 billion consensus estimate by $5 billion, Richard Gilhooly, a government bond strategist at BNP Paribas Securities in New York, said this week. BNP is also a primary dealer.
``If you want to buy bonds, the Treasury's here to sell you lots and lots,'' said John Cerra, who oversees $11 billion of fixed-income assets at New York-based TIAA-CREF.
Posted: Sun Jan 29, 2006 2:02 pm Post subject: Re: Demand at two government debt auctions declined
I won't pretend that I'm knowledgable about how these things work. But...
I watch a lot of CNBC and the guy that works the bond issues (Bob Pasani I think) is usually very upbeat about how these auctions go. He usually says something to the effect of, " the bond auction today went very well and it seems there is still a high demand for treasury bonds."
About the latest auction (the one you are refering to) he said there were signs of weakness in the auction and that it might foretell a slowdown in foreign demand in our debt. No mention of it on CNBC other than that...or anywhere else that I could find (except here).
Fed Chairman Alan Greenspan himself has said that the interest in our debt, "could not continue forever." No one knows when such interest will end aparently, but from what I've read many believe it won't continue indefinately.
This could be a sign that the interest in buying our debt is slowing. Again, I'm no expert, but from what I understand we could face serious economic disruptions if our debt is no longer attractive to foreign or private investors.
Like many other things I think time will tell. Excellent post LadyRuby, thank you. I sure wouldn't mind someone more knowledgable explaining how it works.
Joined: Jan 07, 2005 Posts: 139 Location: Mpls, MN, USA
Posted: Sun Jan 29, 2006 10:36 pm Post subject: Re: Demand at two government debt auctions declined
This sounds to me like other countries are already getting tired of supporting our huge debt.
This could be a simple financial calculation -- as in "those Americans owe too much, we'd better not loan them any more."
It could also involve some other considerations. If the USA is seen as too militarily aggresive maybe China is tired of backing our military spending by buying our debt.
Perhaps investing in American debt is seen as a poor financial risk and as a poor geopolitical decision as well.
Also, I wonder if there are other places looking like better investments in terms of economics or geopolitics. The Chinese seem to be signing agreements with Iran, Saudi Arabia, Venezuela, Bolivia.....maybe they are investing directly in resources or development in those places, and don't feel as much need to invest in US debt...?
These seem like plausible explanations to me....others? _________________ pedaling for peace and ecojustice -- Gary
Posted: Mon Jan 30, 2006 4:56 pm Post subject: Re: Demand at two government debt auctions declined
I'm not saying that this does not signal a reduction in world interest for US debt, but from an investment standpoint, with rates poised to rise very soon after these auctions, investors would probably be willing to wait and get a higher return.
Joined: Oct 06, 2005 Posts: 190 Location: South Texas
Posted: Mon Jan 30, 2006 7:57 pm Post subject: Re: Demand at two government debt auctions declined
Bought gold today (not in response to this, but still, reinforces my decision), and a Canadian ETF. I'm not real confident in the dollar at this point--the fundamentals seem out of whack. _________________ Exporting oil is an act of treason"-- Heitor Manoel Pereira, president of AEPET in Brazil, January 06, 2006
come see me sometime... http://www.sonofchaos.blogspot.com/
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