While rates are low …

Talk of the debt ceiling and attempts to abolish it are troublesome since folks tend to not look at the bigger picture.

The chart above shows the cost of servicing US Federal Debt ( red bars )1 compared with the benchmark, US 10 year interest rate ( black line )2 from 1988 to [...]

Inflation and forecasts of GDP

I’ve written previously about the inflationary pressures that are entering the system but curiously the yield on Treasury Inflation Protected Securities or TIPS went negative two days ago. What’s it all mean? Well, TIPS return to investors a real, not nominal, amount. This amount changes as inflation changes, thus the attraction to investors who [...]

The fiscal cliff, visualised

There has been many stories about the “fiscal cliff” America faces in the fourth quarter, 2012. While I’m very familiar with all the details I didn’t think any story presented the challenge faced by the American bond markets too well so I created the chart above. It shows US Treasury debt by maturity, from [...]

QE 1 and QE 2 = QE 3?

I’ve previously expressed my concerns about Quantitative Easing and The Fed’s holdings of US Treasuries but that isn’t complete picture. Before the credit crunch the Fed held about 800B of treasuries securities. In response to the recession kicked off by the credit crunch in November 2008 the Fed started purchasing Mortgage Backed Securities (MBS’), [...]

Ready for the surge in interest rates?

The yield on the US Ten Year Treasury, 1962 to 2012

The chart above shows the yield on the Ten Year, US benchmark treasury security. This issue is tremendously important as it used as a reference for all consumer loans – mortgages, credit cards, whatever type of debt an American wishes to take on. [...]

The slowing US economy

US 10 year note and US 30 year bond, yields over a twenty year period ending April 2012

The bond market can tell stories – but only if you listen. The chart above shows the yield on two US Government securities – the benchmark US Ten Year Treasury note ($UST10Y, red line) and the [...]

Who owns the most US treasuries?

US Treasuries held by The Feder Reserve and the US Money Supply, 2003 to 2012

Most folks believe that China is the single largest holder of US Treasuries. That’s not the case – as of September, 2011 China only held $1.1483 trillion of US Treasury securities. Who held the rest?

The chart above [...]

Governments must come up with $7.6T in early 2012 …

2012 redemptions ($B)GDP ($B)10Y yield Japan3,0005,4580.98% U.S.2,78314,5861.93% Italy4282,0516.86% France3672,5603.30% Germany2853,2801.93% Canada2211,5773.90% Brazil1692,0874.20% U.K.1652,2482.02% China1215,9263.42% India571,7278.38% Russia131,4796.00% As we all know, most governments are heavy borrowers and almost all developed nations currently run large budget deficits, which means they spend far more than they generate from taxes. Alarmingly, in spite of the credit crunch and [...]

A premature look back at 2011

With one week left in the trading year this might seem premature, but 2011 is one that is best forgotten. A brief look back: were you positioned properly?

In 2011 gold was up 13%, US Treasuries (the benchmark 10Y) were up 8.24% and the US Dollar, benefiting far more from European worries than [...]

So far in 2011, bonds have soundly beaten stocks

The US 30Y Treasury opened at 121.95 on January 3rd 2011 and closed at 141.29 on December 9th 2011, for a YTD gain of 15.85%.

The S&P 500 opened on January 3rd 2011 at 1271.87 and closed on December 9th at 1255.19, for a return of -1.31%.

With roughly three weeks to go, short [...]