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OMG, The 10 Year Just Went Below 2.5%

Thursday, August 4, 2011 - 12:54 PM
Who would have thought the 10 year Treasury would trade right around Alliant's 4-year CD?

 

Folks, this is getting downright ugly.

 

Bozo
4
BozoBozo135 posts since
Feb 14, 2011
Rep Points: 917
1. Thursday, August 4, 2011 - 2:04 PM
Bozo, respectfully I suggest this is good news.  It means the world still believes treasuries are the safest bet.

It will get ugly, soon, if we do not get fiscally sane in the US...SOON.  If rates are brought up slowly and orderly thru US wise policy decisions over the next five years, then we may be ok.  But if political greed and camera glory prevails, and our debt continues its current trend...  then wise, orderly, US policy will not be the author of higher rates.  If the bond vigilantes cause the higher rates, when we have 100 Trillion debt bomb, Greece like interest rates, and 25% unemployment...  that will be ugly.  That will be beyond ugly.

Optimism is good, when combined with wisdom and discipline.  Optimism alone, is really Ostrichism.  That's ugly.

People have great imagination in coming up with all the reasons why everything will be ok.  Too few have any imagination toward true worst case scenarios.  If the politicians and voters could truly see the worst case scenario, we would not have the political nonsense games we have now.  Optimism, without wisdom and discipline, will fail us completely.

Those who lent us all the money from abroad...  will not likely let us walk away from our obligations.  But, I'm sure that sounds like utter nonsense to all the optimists.

We need fiscal conservatives to bring sanity back to the US.  Regardless of party affiliation.  We need sanity and math skills.  Discipline and hard work.  And politicians who make around $49,000...  instead of $249,000...  which is just below that rich line...  $250,000.  How convenient for them, right?
1
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
2. Thursday, August 4, 2011 - 2:13 PM
With Treasury yields plummeting, it does make finding FI investments more challenging, particularly if it drags all FI yields down. Back in 2008-2009, the gap between treasuries and other FI (including CDs) remained high. It will be interesting to see what happens this time. Hopefully, CD yields will not follow treasury yields.
1
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
3. Thursday, August 4, 2011 - 3:23 PM
As I joked over on Bogleheads, with respect to our market allocation (which is age-appropriate, about 100 minus age), we lost a Honda last week, another Honda this week, and a Mercedes today.

I am so, so, glad I took a chunk off the table back on February 18 and plunked it into that Dime CD (thank you Ken, thank you).

My CD ladder never looked so good. I can live with inflation, but the concept of re-testing the lows of 2009, that's too much to bear.

"Age-in-Bonds". Don't forget that CDs are bonds, as well.

Bozo
1
BozoBozo135 posts since
Feb 14, 2011
Rep Points: 917
4. Thursday, August 4, 2011 - 3:34 PM
I'm afraid a flight to safety that's occurring now may not help our deposit rates. I just read the following from this AP article, Stocks plunge as economic, Europe worries continue:
Large investors have moved so much money into cash accounts at Bank of New York that on Thursday the bank said it would begin charging some clients a 0.13 percent fee to hold their cash.

3
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,743
5. Thursday, August 4, 2011 - 4:22 PM
Ken, I suspect we have seen the last of "bankdeals" for some time. I'm not saying one might not be able to stretch for a few basis points here or there, but the prospect of "Japan USA" is upon us. Low rates to the horizon and beyond, no or low growth, and certainty of stagflation. I for one am reasonably content that I have benefitted so much from this blog since 2006. Thank you for your efforts and I hope the move to Florida was OK.

Meanwhile, I assume anyone with half a brain is grabbing the 2.45% Alliant 4-year before it gets yanked. I just wish my USAA CD was maturing yesterday, not August 31. This bond market is just too weird. My son (who happens to be an investment banker) told me last month the bond traders expected 2.5 on the 10 and a major market correction. Lesson: listen to your son.
1
BozoBozo135 posts since
Feb 14, 2011
Rep Points: 917
6. Thursday, August 4, 2011 - 4:43 PM
Bozo, I think you might be overreacting a bit suggesting we have seen the last of bankdeals for some time. Remember, yields can go up just as fast as they can go down, if not faster. I don't think you can compare us to Japan just yet, their situation is materially different from ours in some very important areas. In the last two years, we have seen swings in the 10 year treasury of 150 basis points up and down. I don't know what the future holds, but I am pretty sure there will be opportunities to get decent yields at some point in the not-to-distant future, although certainly not of the 2005-2008 vintage.
1
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
7. Thursday, August 4, 2011 - 6:00 PM
The other challenge lower rates brings, is it makes our debt problem seem less important.  While the Ten Year is paying out 2.5, shorter terms are paying roughly 0%. 

Imagine the excitement in the halls of congress or in the Oval Office...  "We can borrow money for 0%???!!!  COOOOOOOooooooooooooooooL !!!!!!   Have I got some great ways we can spend all that FREE money."
1
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
8. Thursday, August 4, 2011 - 6:07 PM
How does one put Mike on ignore?
1
BozoBozo135 posts since
Feb 14, 2011
Rep Points: 917
9. Thursday, August 4, 2011 - 6:21 PM
just keep shorting treasuries
1
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
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