CORRECTED-TREASURIES-U.S. bond prices dip on jitters over Fed tapering

Comments (2)
PeterCatranis wrote:

Questions every Treasury investor should ask themselves as QE winds down.

1) What is the currency and instrument risk of owning a U.S. Treasury relative to the reward with interest rates near historic lows?

2) What is the only direction short term rates can have a major market move?

3) Who will replace the Fed once they’re tapered out?

4) What’s going to happen when global recovery finally engages and fight to quality trades unwind? Who’s going to be on the other side of these trades?

Personally I believe the U.S. Treasury market in hanging by a 6 trillion dollar thread controlled by foreign investors who have their finger on the sell trigger. The currency risk holding USD for these foreign investors is more in one day than their annual yields, on durations up to 5 years, if foreign selling ignites do you really believe the Fed can stop a 6 trillion dollar freight train? To put this into proper perspective the Quantitative Easing life support totaled around 4 trillion.

If the Fed does step up to the plate and creates the trillions of dollars required to stop the hemorrhage in the Treasury market do you honestly believe the US dollar will maintain its value and inflation will remain contained?

Finally one day I hope the Fed can explain to everyone how stripping savers of trillions of dollars in interest income and forever removing it from the free market economy to save the US Treasury the same in debt service costs stimulated the economy? Adding insult to injury the Fed funds rate hit an all time record low below 0.10% while the prime lending rate remained unchanged at 3.25% since 2009.

Guess we just had it wrong it wasn’t economic stimulus for the taxpayer or saver it was economic stimulus for the banks and US Treasury with the taxpayer/saver once again picking up the tab.

Good Trading,
Peter Catranis

Jan 21, 2014 6:21pm EST  --  Report as abuse
PeterCatranis wrote:

Questions every Treasury investor should ask themselves as QE winds down.

1) What is the currency and instrument risk of owning a U.S. Treasury relative to the reward with interest rates near historic lows?

2) What is the only direction short term rates can have a major market move?

3) Who will replace the Fed once they’re tapered out?

4) What’s going to happen when global recovery finally engages and fight to quality trades unwind? Who’s going to be on the other side of these trades?

Personally I believe the U.S. Treasury market in hanging by a 6 trillion dollar thread controlled by foreign investors who have their finger on the sell trigger. The currency risk holding USD for these foreign investors is more in one day than their annual yields, on durations up to 5 years, if foreign selling ignites do you really believe the Fed can stop a 6 trillion dollar freight train? To put this into proper perspective the Quantitative Easing life support totaled around 4 trillion.

If the Fed does step up to the plate and creates the trillions of dollars required to stop the hemorrhage in the Treasury market do you honestly believe the US dollar will maintain its value and inflation will remain contained?

Finally one day I hope the Fed can explain to everyone how stripping savers of trillions of dollars in interest income and forever removing it from the free market economy to save the US Treasury the same in debt service costs stimulated the economy? Adding insult to injury the Fed funds rate hit an all time record low below 0.10% while the prime lending rate remained unchanged at 3.25% since 2009.

Guess we just had it wrong it wasn’t economic stimulus for the taxpayer or saver it was economic stimulus for the banks and US Treasury with the taxpayer/saver once again picking up the tab.

Good Trading,
Peter Catranis

Jan 21, 2014 6:21pm EST  --  Report as abuse
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