THE STOMACH OF FOREIGN DEBT BUYERS WAS WEAK ON SWALLOWING MORE AMERICAN DEBT.THE U.S. COULD NOT MUSTER UP ENOUGH INTEREST IN FOREIGN OR DOMESTIC BUYERS.THEY HAVE BECOME SICK TO THE SIGHT ON PURCHASING AMERICAN BONDS/TREASURIES AS THEY ARE COMING TO THE REALIZATION THAT THE U.S. WILL NEVER BE ABLE TO MEET ITS OBLIGATION OF UNHEARD OF DEBT.
IT IS OR WOULD BE ESSENTIALLY THROWING MONEY THAT HAS VALUE INTO A CRACK HOUSE TO SUSTAIN THE ARROGANT CRACK HEAD’S ADDICTION AND WARMAKING.
“Treasuries Fall After Weaker-Than-Average Demand at Bond Sale
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By Cordell Eddings and Susanne Walker
Oct. 8 (Bloomberg) — Treasuries declined, with 30 year bonds falling the most in two weeks after the government’s $12 billion auction of the debt drew weaker- than-average demand.
The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.37, compared with 2.92 at the September auction and an average of 2.42 at the last 10 auctions. The 30-year bond yield touched 3.89 percent on Oct. 2, the lowest level since April.
“The auction was very tepid,” said Tom di Galoma, head of fixed-income rates trading at Guggenheim Capital Markets LLC, a New-York based brokerage for institutional investors. “The auction shows that the market can sell off when levels are overpriced. This can be a disappointment in these reopened issues.”
The 30-year bond yield rose eight basis points to 4.08 percent at 4:04 p.m. in New York, according to BGCantor Market Data. The 4.5 percent security due August 2039 fell 1 13/32, or $14.06 per $1,000 face amount, to 107 5/32.
The securities sold today drew a yield of 4.009 percent, more than the 3.994 forecast by six of the Federal Reserve’s 18 primary dealers in a Bloomberg News survey. The previous sale of 30-year debt on Sept. 10 drew a yield of 4.238 percent. Its bid- to-cover was the highest since November 2007.
Stocks Versus Bonds
An investor class that includes foreign central banks bought 34.5 percent of the notes, compared with 46.5 percent at the last auction and an average of 45.36 percent at the past five auctions.
“We continue to see a lot of cash that was on the sidelines during the volatility in the markets being redeployed,” said Richard Bryant, senior vice president in fixed income at in New York at MF Global Inc. “Given the relative returns of other asset classes, Treasuries at these yield levels are not unattractive.”
The U.S. sold $7 billion in 10-year Treasury Inflation Protected Securities on Oct. 5, $39 billion in three-year notes the following day and $20 billion in 10-year notes yesterday as President Barack Obama borrows record amounts to spur economic growth.
“The bond market is telling you the recovery is weak and it will take a long time,” said Ray Remy, head of fixed income in New York at Daiwa Securities America Inc., one of 18 primary dealers that trade directly with the Federal Reserve. “It is concerned about the jobless picture. Stocks are saying earnings are in good shape. I don’t know which will win.”
The Standard & Poor’s 500 Index rose 0.9 percent, its fourth straight day of gains.
Thirty-year bonds yielded 3.96 percent, or 3.09 percentage points more than two-year government securities, before the sale, compared with an average of about 1.27 percentage points over the past five years.
“People are throwing in the towel and moving out the yield curve to capture some yield,” said Arthur Bass, a managing director of derivatives in New York at the brokerage Newedge USA LLC. “The market’s been rallying no matter what.”
Bonds are still attractive compared with similar securities in Europe and Japan when measured by real yields, said David Ader, head of U.S. government bond strategy in Stamford, Connecticut, at CRT Capital Group LLC, in an interview with Bloomberg Radio.
Long bonds “look rich but the buying we are seeing there may not be based on them being rich or cheap, but relatively speaking it looks better than everything else,” Ader said. Thirty-year bonds yield 3.85 percent in Germany and 3.97 percent in the U.K.
Central Bank Rates
The real yield, or the difference between rates on government securities and inflation, for 30-year bonds is 5.47 percentage points today, compared with an average of 3.17 percentage points over the past 20 years.
Policy makers around the world have reduced rates to record lows, including coordinated cuts by six central banks a year ago, to stabilize economies following a squeeze on credit that led to the collapse of Lehman Brothers Holdings Inc.
The European Central Bank left interest rates at a record low to nurture an economic recovery that is being threatened by the appreciation of the euro. ECB officials meeting in Venice today kept the benchmark rate at 1 percent, as predicted by all 53 economists in a Bloomberg News survey. Separately, the Bank of England held its key rate at 0.5 percent.
The ECB, led by President Jean-Claude Trichet, won’t raise rates before the third quarter of 2010, another survey shows.
Futures on the Chicago Board of Trade show a 57 percent chance the Fed will refrain from raising its target rate for overnight lending between banks by April, compared with 64 percent odds a month earlier. The Fed cut its benchmark rate to a range of zero to 0.25 percent at the end of 2008.
Fed Bank of Richmond President Jeffrey Lacker said the risk that the U.S. economy will slide back into recession has declined without disappearing entirely.
“That risk has diminished quite substantially since several months ago,” Lacker told reporters today in Washington. “It’s not entirely zero.”
Credit-market yields indicate the central bank is having some success. The London interbank offered rate, or Libor, for three-month dollar loans stayed at 0.284 percent for a sixth day, down from 4.52 percent a year ago.
To contact the reporters on this story: Susanne Walker in New York at email@example.com; Cordell Eddings in New York at firstname.lastname@example.org;
Last Updated: October 8, 2009 16:06 EDT “Click here for reuse options!