Wednesday, March 9, 2011

$183 Billion 30-Year Treasury Bonds Auctioned in 2010

It doesn't take a lot to move long-term TIPS prices. In the grand (ponzi) scheme of things, there just aren't that many. Our country is borrowing well over a trillion dollars per year right now. $15 billion is a drop in the bucket.

This is currently working out in my favor. I was a participant in the last 30-year TIPS auction ($9 billion offered in 2011's first TIPS auction). The rate has fallen from 2.19% that day to just 1.89% today.

Who knows what the long-term has in store? I can say that I would not be comfortable owning 92% of the bonds in this pie chart for the full 30 years.

I continue to lean deflationary in the short-term. I don't lean deflationary in spite of $100 oil though. I lean deflationary because of it. I expect something to break again.

That said, I am braced for slow growth and/or inflation over the long-term. I've been braced this way for 6 1/2 years and I see little evidence to suggest that I should change my opinion. Hindsight isn't exactly beating me up all that much, at least so far. There was definitely a growth problem and there has definitely been at least some inflation (the
CPI is up about 17% since I turned bearish in 2004). Win win. Sigh.

Source Data:
2010 Auction Results: TIPS
2010 Auction Results: 30-year Bonds


Mr Slippery said...

The housing credit bust created a long lasting deflationary bias. The Fed has had the will and power to print trillions to keep things mostly afloat, but not without consequences. Markets anticipate these things and usually overshoot in both directions.

I have the same sense that you do about something getting ready to break. There are pressure points everywhere I look.

Stagflationary Mark said...

Mr Slippery,

I don't think this chart would necessarily be a "sure thing" shorting opportunity right now.

It shows the number of unemployed per job opening.

We'll be getting another month's worth of data for it later this week. This is just a preview of an upcoming post.

Anonymous said...

How about a chart of 30-year conventional and 30-year TIPs compared to all treasuries?

Anonymous said...

See page 45/93 here:

Note that this does not include treasury bills.

The average maturity of Treasury debt held by the public is up to ~59.5 months.

Also from page 50 of 93:

Treasury may consider employing a marketing campaign to increase broader ownership of UST debt as an asset class in individual portfolios.
Treasury could take a page from earlier efforts to promote individual ownership of UST debt.
Current Savings Bonds are the offspring of WW I Liberty Bonds and WW II Defense Bonds.
Defense Bonds (renamed War Bonds after Pearl Harbor) benefited from more than $250m advertising donated during the first three years of the National Defense Savings Program.
Through a combination of new attractive products, and aggressive marketing, Treasury could aim at growing the household ownership share of Treasuries to the average of the last 50 years. <<

You'll know the bond bubble of the last 30 years is over when the Treasury succeeds in growing household ownership share.

Stagflationary Mark said...


Thanks for the link! There's a lot of stuff to read and much of it is fascinating.

From page 32:

Introducing new products that are aligned with investor needs.

I propose II-Bonds. They pay twice the fixed interest rate of I-Bonds. It wouldn't even cost the government a penny, since I-Bonds only pay a fixed rate (above inflation) of 0.0% right now. Therefore twice as much isn't really a problem! Sigh.