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Here's what will be auctioned next week.
$24 billion in 13-week treasury bills.
$25 billion in 26-week treasury bills.
$44 billion in 2-year treasury notes.
$42 billion in 5-year treasury notes.
$32 billion in 7-year treasury notes.
$11 billion in 5-year TIPS.
That's $178 billion.
As much as it pains me to say this, I will be buying some of the 5-year TIPS. I'll be getting a very poor interest rate. I just can't think up any safer place to park money that I know I will need in 5 years.
Homework Assignments for Monetary Policymakers
A related issue, which I'll assign for extra credit, is critical for the conduct of policy in the future. Some observers have attributed the bubbles observed in some asset prices in recent years to a decades-long downward trend in real interest rates. In this view, the decline in interest rates has caused investors to reach for yield by purchasing riskier assets with higher returns, driving the prices on riskier assets above fundamental values.
You think?
Many central bankers and economists, myself included, were a little complacent coming into the crisis. We thought we knew enough about the basic structure of the markets and the economy to achieve economic and price stability with relatively minor perturbations. And we thought we had the tools necessary to deal with liquidity shortages and maldistributions. The reality is that we didn't understand the economy as well as we thought we did.
You think?
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6 comments:
For those interested, I've been heckled in the comments today.
Silly Roth IRA Math
It's the risk I run of course. I live by the heckling and therefore must die by it too.
A related issue, which I'll assign for extra credit
Extra credit? Good grief, our eCONomy is drowning in credit. These dingbat central bankers have debt on the brains.
The reality is that we didn't understand the economy as well as we thought we did.
As well as we thought? How about didn't understand it at all. The entire bubble era has been the result of frauds and deceptions.
And the Fed, the SEC, OCC OTS, FDIC, etc. are all part of the deception. No way can I believe they are simply incompetent. They're in on the CON. They're commpletely CONtrolled and beholden to Wall St.
These Government agencies give Wall St. legitimacy. They enable the looting. They preserve the value of the fraudulent credit.
Thanks to the Greensham and Bernanke bubble era, most people in America have little or no wealth and that is not hyperbole.
Heck, half the formerly middle class probably have negative net worths.
With that bond action expect stock market drops right before auction (0.5-1%) and as soon as they close the market will rocket higher. A friend of mine has been trading this after we worked on it (I refuse to do it myself, plus I cannot day trade HA!) and is making a killing.
I should ask him:
"Give me a dollar man! I could buy a mutual fund, or an IRA and chit!"
mab,
Extra credit? Good grief, our eCONomy is drowning in credit. These dingbat central bankers have debt on the brains.
They say that truth is funnier than fiction I think. So on that note, hahaha!
Unfortunately, the truth can also often be more tragic than fiction. Sigh.
GYSC,
I got a fantastic rate on my 30-year TIPS back in February. It must have backfired for them then. :)
It has yet to fail; short right at 11am, roll long at 2pm and end the day at 3:30 up nicely. Trend is your friend, right? What a casino.
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