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Treasury Holds 'Awful' Auction; 10-Year Yield Hits 3.99%

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June 10, 2009 – Comments (19)

 

4.0% on the 10-year Treasury here we come.  Demand for 10-year Treasuries at today's auction was worse than many analysts had expected it to be, pushing the yield on said notes to 3.99%.

A senior vice president of MF Global called the auction "awful" and the government has to issue a lot more debt over the next several months.

I have been blogging about rising rates since March (see post: The yield on the 10-year is slowly creeping back up).  This is something that everyone needs to keep an eye on.  Rising interest rates will not help the ailing economy, particularly housing.  The 10-year has traditionally been linked to mortgage rates.  The higher rates go on mortgages, the more downward pressure it will put on home prices.

Treasury Sells $19 Billion in Ten-Year Notes at 3.99% Yield

Deej

19 Comments – Post Your Own

#1) On June 10, 2009 at 2:09 PM, rd80 (97.08) wrote:

Borrowing needed for the gov't to attempt to stimulate the economy drives up 10-year rates.  In turn, 10-year rates drive up mortgage rates making home purchases and refinancing less attractive.  Higher rates choke off economic growth.

Instead of stimulating the economy, the government has strangled it.

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#2) On June 10, 2009 at 2:10 PM, cbwang888 (25.59) wrote:

We are selling our kids' future for the problems we created.

Change is coming? I don't think so ...

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#3) On June 10, 2009 at 2:19 PM, FreeTruth (< 20) wrote:

Ha Cbwang, change IS coming...none of us will like it though.

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#4) On June 10, 2009 at 2:19 PM, Rehydrogenated (32.26) wrote:

w/e I just got a car loan at 4.7% I'm happy.

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#5) On June 10, 2009 at 2:21 PM, goldminingXpert (29.55) wrote:

I keep screaming about the danger of the bonds--nice to see some people are listening.

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#6) On June 10, 2009 at 2:23 PM, checklist34 (99.73) wrote:

as a mild counterpoint to the bond yields rising...

They were at all time lows, on a sort of bubble if you will.  And when yields dropped to all time lows it was because of all time fear of stocks commodities and other types of bonds. 

Yields on treasuries had nowhere left to go but up.  And they remain reasonably near their all time lows.

I have a great strategy all figured out for a situation where treasury yields get very high, and I'm ready to execute it.  :)

 

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#7) On June 10, 2009 at 2:28 PM, alstry (36.32) wrote:

Aren't you the FOOL that is saying that we are going to have a second half recovery.....PREPARE!!!!!!!!!!!!!!!!!!!!

20% here we come......if we keep printing.

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#8) On June 10, 2009 at 2:29 PM, goldminingXpert (29.55) wrote:

It's not where the yield is now... it is the speed at which they are rising. I am unable to find a historical precedent. Yields rising this fast is unhealthy and is destroying things--as I've posted many times, mortgage volume is down 75% from peak when interest rates were favourable in the winter...result housing will take another sharp leg down.

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#9) On June 10, 2009 at 2:33 PM, Jimmy2008 (< 20) wrote:

Obama wants "Change", like quarters, dimes, cents. They have intrinsic value as they are made of copper, zinc etc. He does not like USD bills because they have no intrinsic value. In other words, he wants our real money and our children's.

 

This is the "change" we can count on.

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#10) On June 10, 2009 at 2:37 PM, cbwang888 (25.59) wrote:

Inflation is the only way out of this debt thing and then 3.99% will then look awefully cheap.

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#11) On June 10, 2009 at 2:39 PM, goldminingXpert (29.55) wrote:

Inflation is the only way out of this debt thing

There's always default. I view this as the more likely outcome at this point.

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#12) On June 10, 2009 at 3:14 PM, ttboydxb (28.90) wrote:

GMX, (or anyone else) what would be the repercussions of the US defaulting? No more treasury sales at all?  Markets & doller S^%t themselves again?  I have no idea...

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#13) On June 10, 2009 at 3:44 PM, angusthermopylae (40.11) wrote:

ttboydxb,

Short answer:  War.

Longish answer (this would require an entire book...or at some point in the future, a history book):  Bad juju.  It could go like this:

--US defaults.  "Sorry, everybody--we're broke, so we aren't going to pay."

--In the US, everyone who has assets held in Treasuries suddenly has nothing...at least, until "The Plan" comes out to figure out what they will be paid (GM, Chrysler anyone?)

--Around the world:  China, Japan, Germany, Britain...everyone who has US Treasuries now has enough toilet paper on hand (no pun intended) to collapse the local TP industry...and they are still peeved because this is money they are owed, dammit!

--Foreign governments possibly start seizing US assets for two reasons:  a) they are owed that money, and b) they are broke and have to scramble for any resource they can get.

--Foreign businesses really don't want to deal with either US govt or its citizens...after all, they are broke.  Along with cutting off oil, metals, and products from the US, it also crashes their own countries GNP...no exports to the biggest consumers per capita in history = no profit for your widgets = closing down your own economy.

--So everyone sits around, putting the old Treasuries to their new use in the "Throne Room," and they start sharpening their knives and organizing the troops....because "those bastiches" have the resources we need to get ourselves out of this mess (oil, metals, land, water, slave labor)...if they would only be reasonable and hand it over.

Ever see the movie "A Boy and His Dog"?  Pretty much like that...

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#14) On June 10, 2009 at 3:51 PM, masterN17 (< 20) wrote:

Do you mean to say that the yields to 10-yr T-bills are returning to their pre-crash levels?  And that the yields are increasing as fast as they decreased during the crash?  How terribly unfascinating!

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#15) On June 10, 2009 at 3:58 PM, checklist34 (99.73) wrote:

GMX, i think your bond commentaries are interesting. 

All i can offer as commentary to the rate at which they are rising is that the yields fell much faster late last year. 

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#16) On June 10, 2009 at 4:14 PM, FreeTruth (< 20) wrote:

What is alarming is that the government and Federal Reserve are making a concerted effort to keep yields and by extension interest rate DOWN.

 This movement is showing that the dike has more than one hole and Benny, Timmy and Barry are going to need a few more Dutch children to stick their fingers in the holes. (You know, the old story about the boy who kept The Netherlands from flooding? We're flooding, it's just in money!)

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#17) On June 10, 2009 at 4:22 PM, WillSurfForFood (70.92) wrote:

> Ever see the movie "A Boy and His Dog"?  Pretty much like that...

 

Awesome, I've always wanted a dog I could telepathically communicate with. I vote for default.

 

 

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#18) On June 10, 2009 at 4:41 PM, ttboydxb (28.90) wrote:

Angus,

 

Thanks for the short version, tho i'm sure the long version would rock!

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#19) On June 10, 2009 at 5:05 PM, maxnik0215 (< 20) wrote:

mortgage volume is probably down 75% from it's peak in winter because everyone who could and wanted to re-finance has done it already.... And as I remember last summer oil was rising really fast and what happened then? 

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