Nasdaq.com: "Something very strange is happening with U.S. treasuries"

[JurisDoctorOfDoom]

Found by way of Cryptogon:

This means that the Treasury took up EVERY single cent of competitive bids coming from indirect buyers. Remember, indirect buyers are usually assumed to be foreign governments (even the Treasury website admits this).

If this was the case yesterday, then foreign governments barely bought much of anything in yesterday’s auction (only 19% of total debt issued). Moreover, it implies that Primary Dealers (those having to buy) had to gorge on the auction to make up for the fact that few if any foreign governments are interested in buying our debt anymore (including even short-term debt).

Or…

One could potentially argue that this indirect buying came from the Fed covertly buying under the guise of an indirect bidder (the Treasury recently changed the definition of what qualifies for an indirect bidder to make it more vague). It IS rather odd that every single cent of competitive bidding coming from indirect buyers was filled. It’s almost as if the indirect buyers knew precisely WHAT yield to accept… OR were simply trying to take up the slack in what was already a VERY weak auction.

I cannot tell you which of the above is true. Heck, neither of them could be and something completely different could be happening. But regardless, something very, VERY strange is going on in US debt auctions.

I wrote earlier this year that bonds, not stocks, would be the big story of 2010. We’re only into February and there are already some very unusual things happening on both the long (30 year) and the short (4 week) ends of the Treasury curve. And with the Fed’s Quantitative Easing Program scheduled to end in March, things are about to get a whole lot more interesting (barring of course an extension of the QE or QE 2.0).

Keep your eye on US Treasuries. Stocks, despite being so popular with investors are usually the LAST to get what’s coming down the pike. And investors just parked $30 billion for a month with Uncle Sam at virtually NO YIELD yesterday.

Put another way, someone(s) is/are willing to not make money just for the sake of insuring return OF capital (the US can always print money to return it) rather than any return ON capital.

Original article: http://community.nasdaq.com/News/2010-02/Something-Very-Strange-Is-Happening-With-Treasuries.aspx

[pamplemousse]

This ties in perfectly with what Stoneleigh of The Automatic Earth said during her Portland visit.  Get your money out of the banking system, the FDIC cannot insure everybody, go to short term Treasuries even at a 0% rate, and you can keep your money "at" the Treasury without investing it in a treasury bill (see 0% certificate of indebtedness, something you can buy with Treasury Direct).

[MooreTime]

Does anyone else find that as time goes by, news stories or predictions that were on "alternate media" sites are now on mainstream sites....but about 6 months later?

The shit is going to hit the fan hard

[shaman*ess]

Yep, I posted that Nasdaq bit earlier today over in today's Dow thread, but I'm glad to see it with its own thread.

And here's something I just added over in the Dow thread:

Hmmm...Jim Willie is talking about this auction question today as well...

http://www.kitco.com/ind/willie/feb252010.html

Some reports mention that bond professionals are extremely anxious about the results of recent USTreasury auction. A huge jump in the Direct bidders took 24% of the auction supply. The apparent lack of transparency (no details) behind this group has increased speculation that the USFed could be directly buying its own auctions, so as to prevent both an auction failure and a sudden rise in yields. Safe haven, obviously not!

The Indirect bidders ledger item is widely viewed as the most important category. It defines the success or failure of the auction, since foreign central banks are entered from this category. A 30-year bond auction came in with a pathetic 28% bid as Indirect, far below the 36 to 40% levels seen across year 2009. This is worth watching for establishment of trend before billboard alarms (AMBER ALERT) are made.

Edit: Check out the graph at the original link, too.  

And another Willie quote:

The foreign accumulation of new USTreasury debt is tiny compared to what official USTBond debt is issued and auctioned. Nobody seems to be capable of primary school mathematics, once graduation to Wall Street and USGovt service is achieved. If new debt is five times what foreigners are buying, then after factoring the domestic bond fund absence like PIMCO (they detest bonds nowadays), one can quickly conclude that the USFed/Treasury tarnished tagteam is monetizing 60% to 80% of all new debt issuance. Isolation is here, but must be more fully recognized.

[anarchist]

in a month the headlines will read " The U.S. Treasury Bond Market Collapsed Unexpectedly in March."   

[♥RÉĎRËÅMÊŖ♥]

 

so the Treasury 'relaxes' the rules on what constitutes an indirect bid at the Treasury Bond Auctions....... then it is suspected that the Fed is covertly buying the govt bonds (debt)..... (with no return on investment ostensibly)..... and therefore if this is true... no other foreign country has ANY faith in the long term/short term soundness of the US economy and was NOT actively buying bonds? It is being kept hush hush .....?

Is that what it means? (sorry US govt finances is hard for me).

that is the 'something weird'?

[picasso moon]

Thanks, Matt, and shaman'ess!! Good stuff to shed light on.

[shaman*ess]

in a month the headlines will read " The U.S. Treasury Bond Market Collapsed Unexpectedly in March."   

  Spot on!

so the Treasury 'relaxes' the rules on what constitutes an indirect bid at the Treasury Bond Auctions....... then it is suspected that the Fed is covertly buying the govt bonds (debt)..... (with no return on investment ostensibly)..... and therefore if this is true... no other foreign country has ANY faith in the long term/short term soundness of the US economy and was NOT actively buying bonds? It is being kept hush hush .....?

Is that what it means? (sorry US govt finances is hard for me).

that is the 'something weird'?

It's hard for me too!     But I think you're on the right track, Redreamer. 

Thanks, Matt, and shaman'ess!! Good stuff to shed light on.

You're most welcome, picasso moon.   

[Zac]

Get your money out of the banking system, the FDIC cannot insure everybody, go to short term Treasuries even at a 0% rate, and you can keep your money "at" the Treasury without investing it in a treasury bill (see 0% certificate of indebtedness, something you can buy with Treasury Direct).

The FDIC is part of the US government and enjoys an effectively unlimited credit line with the full faith and credit of the US government.  All of the federal government debt is denominated in US dollars so a default is, by definition, not possible.  The government will simply print (electronically or otherwise) as much money as they need to fulfill obligations.  Inflation will result. 

I question the benefit of keeping large amounts of paper currency under your mattress rather than in a bank account though I doubt it will make much difference either way in the long run.  I think it is prudent to keep enough cash for a couple months expenses, but keeping too much cash is probably riskier (from burglary/robbery) than just leaving it in a bank. 

[Patchze]

Get your money out of the banking system, the FDIC cannot insure everybody, go to short term Treasuries even at a 0% rate, and you can keep your money "at" the Treasury without investing it in a treasury bill (see 0% certificate of indebtedness, something you can buy with Treasury Direct).

The FDIC is part of the US government and enjoys an effectively unlimited credit line with the full faith and credit of the US government.  All of the federal government debt is denominated in US dollars so a default is, by definition, not possible.  The government will simply print (electronically or otherwise) as much money as they need to fulfill obligations.  Inflation will result. 

I question the benefit of keeping large amounts of paper currency under your mattress rather than in a bank account though I doubt it will make much difference either way in the long run.  I think it is prudent to keep enough cash for a couple months expenses, but keeping too much cash is probably riskier (from burglary/robbery) than just leaving it in a bank. 

So what should one do if one has $90K in a bank savings account, earning next to nothing on interest?

[Abhaha]

I question the benefit of keeping large amounts of paper currency under your mattress rather than in a bank account though I doubt it will make much difference either way in the long run.  I think it is prudent to keep enough cash for a couple months expenses, but keeping too much cash is probably riskier (from burglary/robbery) than just leaving it in a bank.  

Unless the bank itself decides to rob you the way they did in Argentina. My guess is that it is all risky no matter how you cut it.

[Stug]

Does anyone else find that as time goes by, news stories or predictions that were on "alternate media" sites are now on mainstream sites....but about 6 months later?

The shit is going to hit the fan hard

Big +1 to that. Anyone else feeling sympathy with those ancient Greek seers and oracles who were cursed with knowledge of the future and took out their own eyes? In the words of Cap'n Jack "Bugger. . ." 

[Zac]

Get your money out of the banking system, the FDIC cannot insure everybody, go to short term Treasuries even at a 0% rate, and you can keep your money "at" the Treasury without investing it in a treasury bill (see 0% certificate of indebtedness, something you can buy with Treasury Direct).

The FDIC is part of the US government and enjoys an effectively unlimited credit line with the full faith and credit of the US government.  All of the federal government debt is denominated in US dollars so a default is, by definition, not possible.  The government will simply print (electronically or otherwise) as much money as they need to fulfill obligations.  Inflation will result. 

I question the benefit of keeping large amounts of paper currency under your mattress rather than in a bank account though I doubt it will make much difference either way in the long run.  I think it is prudent to keep enough cash for a couple months expenses, but keeping too much cash is probably riskier (from burglary/robbery) than just leaving it in a bank. 

So what should one do if one has $90K in a bank savings account, earning next to nothing on interest?

I would suggest a combination of oil and gas royalty trusts (MTR is one example), physical commodities, and a small portion in precious metals (as in silver eagles and kruggerands).  Solar panels may be a good investment if you have a house. 

This website has a lot of good info on royalty trusts:

http://www.mcdep.com/

[AreWeThereYet]

So what should one do if one has $90K in a bank savings account, earning next to nothing on interest?

I would be spread out across 2 credit unions and in 6 month CD's or MM's..not a savings account.

[BigGreenFrog]

So what should one do if one has $90K in a bank savings account, earning next to nothing on interest?

I would be spread out across 2 credit unions and in 6 month CD's or MM's..not a savings account.

"Cash in the bank" is simply an asset class.  Spreading it around to different banks or credit unions has it's positive point but does nothing to address the underlying problem of the asset class itself.  If you are severely concerned about the viability of cash as an asset then the only option is to move to another (or several other) asset classes.  Which one will depend entirely upon your personal financial situation and needs.  What is your current debt situation?  What are your monthly expenditures?  What is belief regarding the likelihood of governmental collapse?

I personally would not recommend foreign currencies as an option due to the extreme probability that if thing s go to hell you would not be able to transfer out of that asset when you want to.  US Treasuries would also be very dangerous if indeed the US were to monetize their debt.  In that event you would get your investment back out to you but at a greatly inflated rate as well as most likely at a timed delay. 

The idea is asset protection, the prevention of the erosion or destruction of your accumulated wealth.  To achieve this I would recommend a transfer from cash to a series of concrete assets.  Physical gold (NOT PAPER GOLD), physical silver, any commodity that you use on a regular basis (stock up on it), any physical asset that is good for trade that can also easily be sold later in the event that you want to move out of that item, such as:  cases of alcohol, ammunition, firearms, food stocks, household consumables and the like.  These are items that people will use with or without a collapse...