[copious.abundance]

--> Marketwatch <--

BOND REPORT
Treasurys are 'still the place to be'
Investors, particularly foreign buyers, snap up huge auctions, keeping yields low
By Deborah Levine, MarketWatch
Last update: 4:09 p.m. EST Nov. 13, 2008

NEW YORK (MarketWatch) - The U.S. government easily found buyers for unusually large debt sales this week, overriding concerns that it would have to pay high rates to fund hundreds of billions in bailout programs.

In its largest quarterly debt sale in more than four years, the Treasury Department issued $55 billion in notes and bonds - some at record-low yields.

The results indicate that demand for U.S. Treasurys as a safe-haven investment remains strong, despite the flood of new supply and a worsening outlook for the U.S. economy. Foreign investors in particular stepped up to the plate, perhaps reacting to fears about a global recession.

"The auctions reflect that Treasurys are still the place to be," said William O'Donnell, U.S. government bond strategist at UBS Securities. "This recession is still fluid."

On Wednesday, the government sold a record $20 billion of 10-year notes to yield 3.783%. Indirect bidders, a class of investors that includes foreign central banks and sovereign wealth funds, took 36% of the sale -- the most since May 2007.

The sale of 30-year bonds on Thursday came at a yield of 4.31%, the lowest yield since the government began issuing debt regularly in the 1970s.

"The Treasury is getting a great deal," O'Donnell said. "It's not costing them a lot of money and they're locking in good long-term rates."

[...]

[patience]

Not for long.

US to Default by summer 2009

Good luck with holding Treasuries. The long end of the bond curve is starting up, very likely the beginning of the end for US debt, considering that the Chinese just gave the US the finger with regard to helping the dollar, and the Saudi's are a bit short on oil revenues, and both have inflation issues.

30 year Treasuries auction, not good news for US

Sold to you.

[Tyler_JC]

What would you say the odds are of a US Default by the summer of 2009?

1%? 10%?

If you think it's anywhere near likely, you should be getting rid of all of your dollars and dollar-denominated assets IMMEDIATELY.

I happen to think the likelihood of this event is almost zero.

[Revi]

I don't think it's all that likely, but I'm not buying treasuries.

I don't know what to believe. It's all getting pretty scary.

Here's an article that takes a while to load about the banking crisis. It blames it on the illuminati.

http://theinternationalforecaster.com/I ... ng_To_Blow

I don't know who or what to believe any more.

[eastbay]

What would you say the odds are of a US Default by the summer of 2009?

1%? 10%?

If you think it's anywhere near likely, you should be getting rid of all of your dollars and dollar-denominated assets IMMEDIATELY.

I happen to think the likelihood of this event is almost zero.

I believe it'll happen eventually, but it'll take a mighty severe economic catastrophe to make it occur that soon.

Tyler, with that concern about wealth preservation in mind, what do you think about keeping a portion of one's portfolio in dollar-denominated assets that are certain to rise along with a serious escalation of inflation, should it occur?

I'm thinking primarily, of course, commodities.

[seahorse]

Apparently the Arabs don't think treasuries are the place to be, as they just bought $3.5 bn worth of gold in the last week.

Arabian News

[Jotapay]

Apparently the Arabs don't think treasuries are the place to be, as they just bought $3.5 bn worth of gold in the last week.

Arabian News

Wow. That is like 300,000 pounds of gold. Talk about Ali Babba and the 40 Thieves.

[eastbay]

Apparently the Arabs don't think treasuries are the place to be, as they just bought $3.5 bn worth of gold in the last week.

Arabian News

They certainly got one heck of a good deal on it too. Better than treasuries!
I have a sneaky hunch we'll see more state gold buying over the near-term.

[Tyler_JC]

I wouldn't suggest buying treasuries either.

The yields are lower than the real inflation rate, even before you take capital gains taxes into account.

That being said, I wouldn't be desperately selling them either. If the Treasurys are short term, I'd hold on to them until maturity. If they are longer than 5-year in length, I'd sell.

Just my general sense of it.

Gold is likely to top $1000/ounce (again) in the next couple years.

The Federal Reserve is currently in the process of papering over the losses of the financial system. This will, eventually, be very damaging for the US Dollar.

[lowem]

Let's face it, nothing is working.

No matter where you put your money, you are likely to lose out to either inflation, deflation, default, fraud, theft, or confiscation.

That applies whether you're talking about cash, bonds, treasuries, domestic/international stocks, gold, silver - whatever.

Time to take a hard look at your asset allocation and balance and try to decide where to go from here.

[patience]

We're cashing out of T's this week and paying off the kid's morgage, to hold the note. (I trust the kids to help in our old age, far more than the govt.) The rest goes to cash for a time, until steel prices drop, then buy steel for our business. Metal scrap prices have crashed, so wholesale steel will fall some more, I think. (Not very liquid, so I'd better be right-iit's a buy-and-hold for us.) Another portion goes to business supplies we will use, just buying ahead. Some goes for setting up the kids to farm with horses, including harness, fencing, and a small livestock building, and a blacksmith shop on their place.

I'm looking at long term storage of dry charge batteries, spares for solar. (Thanks for the help, folks!) And probably a root cellar.

My crystal ball is as faulty as anyone's, but I'm betting it all on the economy crashing.
edit: I should have said WE are doing these things. Praise be to God for my wife and kids who are with me 100% on this.

[seahorse]

Praise be to God for my wife and kids who are with me 100% on this.

I learned this lesson over and over as an attorney dealing with people in hard times brought about for whatever reason. Your family is your best retirement plan. 100 years ago, people didn't even know what social security, 401ks, all that other gibberish were because they didn't need them with their families and friends. Somewhere along the line, we all got snookered into this belief that if we had social security, 401ks, etc., we didnt' need anyone but ourselves. How wrong that was, and what a false sense of "independence" it gave.

[shady28]

I wouldn't suggest buying treasuries either.

The yields are lower than the real inflation rate, even before you take capital gains taxes into account.

That being said, I wouldn't be desperately selling them either. If the Treasurys are short term, I'd hold on to them until maturity. If they are longer than 5-year in length, I'd sell.

Just my general sense of it.

Gold is likely to top $1000/ounce (again) in the next couple years.

The Federal Reserve is currently in the process of papering over the losses of the financial system. This will, eventually, be very damaging for the US Dollar.

I was about to rail against this, until I saw your time horizon (5 years).

I think deflation is going to be the name of the game throughout 2009. After that, perhaps 2010, we may get back into inflation.

Inflation won't happen until the debt bubble collapses. The current methods used for fed bailouts is actually creating a lot more debt, not liquidating it. As long as there is this much debt weighing down the economy, dollars will be in high demand.

[lowem]

I think deflation is going to be the name of the game throughout 2009. After that, perhaps 2010, we may get back into inflation. Inflation won't happen until the debt bubble collapses. The current methods used for fed bailouts is actually creating a lot more debt, not liquidating it. As long as there is this much debt weighing down the economy, dollars will be in high demand.

Mmm-hmm. Hyperdeflation first, followed by hyperinflationary collapse. Total disaster.

Trillion-dollar question is the time-frame. Gathering from both the contrarian and peakoiler communities, I'm seeing anything from 12-18 months, out to 2-3, to 5 years before the end game kicks in.

[mattduke]

etoys

[patience]

Timing? For the US, or any individual country in a similiar debt situation, it looks to me like it depends on how long they can get that big debt financed. When their credit gets cut off, it is OVER.

Those who know more than I, say that the eastern European countries are ripe for failure. If they tank, then western Europe, who lent them a lot of money, is in trouble. No country looks to be immune. China announced a huge "stimulus". The Japanese stock market is tracking the US Dow. Looks to me like after the first of the year when US retail is obviously DOA, with the implications for the tax take next year, US investment will fall.

The whole financial Ponzi scheme is unravelling much faster than many predicted. I'm betting on mid-2009 being a watershed of failures around the world, as outlined by GEAB recently.

edit: Wonder where Oilfinder went?

[copious.abundance]

edit: Wonder where Oilfinder went?

Still here. Pretty much the responses I expected. I'll be awaiting that US Treasury default next summer.

[patience]

Oilfinder,

Here ya go. Something to chew on:Who willl Finance America's Deficit?

And another tidbit:

German Bond Auction Fails

And, it seems the Obama's home state is broke:

Illinois not paying the bills

Looks like we are right on track for a meltdown.

[copious.abundance]

I'll be waiting.

[copious.abundance]

--> Bloomberg <--

Obama Bonds to Give Buyers Taste of Japan Lost Decade
By Wes Goodman

Dec. 8 (Bloomberg) -- Japan’s biggest bond investors say Barack Obama has room to unleash a flood of Treasuries without driving up borrowing costs as he tackles the worst economy since World War II.

The U.S. is starting to look like Japan in the 1990s, when the Bank of Japan struggled to revive growth as the combination of deflation and recessions stranded the nation in the so-called Lost Decade. Yields on Treasuries are falling as the government sells a record amount of debt to prop up the American economy. Two-year note yields have fallen to 1 percent, compared with 0.57 percent for Japanese government bonds of similar maturity. The gap last week touched the narrowest since 1992.

“History repeats itself,” said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp., which manages the equivalent of $200 billion and invests on behalf of Japan’s biggest bank. “Based on our experience in Japan, the same thing will happen in the U.S. The U.S. has more room to borrow.”

[...]

Mizuho, which predicted the rally in Treasuries in 2007 and 2008 as the U.S. housing market began to crumble, said government spending won’t keep prices and the economy from falling.

“Deflation, rather than supply, sent yields down in Japan,” said Hiromasa Nakamura, a senior investor in Tokyo at the firm. “The same situation will occur in the U.S.”