[jato]

Look at the current bond yield curve

2 year= 3.60
10 year= 3.94

Only 34 basis points apart! I have read that a flat yield curve can indicate a recession or otherwise Bear market.

Anyone else see a problem with the curve?

Any good articles or sites on the issue?

[Petro]

I'm certainly not an expert, but just tune in to cnbc the talking heads were all over this today...albeit stating it is just wonderful, all is well this will keep the economy going because, get this, people are refinancing once again! Sorry for the sarcasm, but... Seriously, it's all over the financial news.

[jato]

Thanks. I just scan the yield curve everyday as I do my internet routine. It seemed like it moved down a great deal in one day.

[MicroHydro]

The stock market sees steady corporate profits. The bond market sees a depression. They can't both be right.

[0mar]

$this->bbcode_second_pass_quote('MicroHydro', 'T')he stock market sees steady corporate profits. The bond market sees a depression. They can't both be right.

[RiverRat]

On the topic of rates ...

another refi wave !


Great … keep racking up the debt … ching-ching
Hey … the economy MUST keep growing.
Question … what’s left … seems like only smoke and mirrors

I’m trying to locate the article that explained the relationship between flat yield curves and recessions. I think it stated that it has never been the case that a recession did not follow a flat curve.

[Claudia]

$this->bbcode_second_pass_quote('', 'T')he stock market sees steady corporate profits. The bond market sees a depression. They can't both be right.

[smiley]

$this->bbcode_second_pass_quote('', ' ')The stock market is made up of a large volume of ordinary-person mutual fund investors who have been told to expect long-turn returns of 11% from the stock market, and invest automatically every month in their 401K's. This 11% has attained a bizarre certitude in people's minds. People don't connect it to particular growth expectations in the economy, it kind of has a reality all on its own.

[emersonbiggins]

$this->bbcode_second_pass_quote('', '
')Treasury says 30-year bond is coming back next year, a move to help finance national debt

JEANNINE AVERSA
AP Economics Writer
WASHINGTON — The Bush administration announced Wednesday that it is bringing back the 30-year Treasury bond next year, a move that would help finance the national debt and should hold appeal for investors looking for a safe, longer-term investment option in their portfolios.

The Treasury Department said the first auction of the 30-year bond will take place in the first quarter of 2006, with auctions held twice a year.

Treasury Secretary John Snow said the decision to revive the bond was based on "our commitment to prudent debt management and our desire to maintain cost-effective and diversified portfolios."

The United States stopped selling the "long" bond in October 2001, which turned out to be the last year the government produced a budget surplus. After that, though, it has racked up record amounts of red ink, helping to push up the national debt, which now stands at $7.8 trillion.

Timothy Bitsberger, the department's assistance secretary for financial markets, told reporters at a briefing that Treasury anticipates that around $20 billion to $30 billion in 30-year bonds would be sold each year.

Analysts said resurrecting the 30-year bond, which the government first began selling in 1977, makes sense from a number of perspectives. Long-term interest rates are currently low and if they stay that way, the government would have an opportunity to borrow money at a very attractive rate.

Similarly, by issuing 30-year bonds the government would have the ability to refinance shorter-term debt —which can expose the government to higher financing costs if interest rates rise. Refinancing shorter-term debt with longer-term debt that is locked in at a particular rate could help shield the government from so-called "rollover risk," analysts said.

Moreover, 30-year bonds are a good asset for pension funds, insurance companies and other investors to round out investment portfolios and hedge risk, bond experts said. With the big wave of upcoming retirees coming from the baby boom generation, demand for a safe, longer-term, government bond is likely to increase, bond experts said.

Currently, the government's longest maturity is a 20-year inflation-indexed bond.

Other countries also are offering longer-term government securities to tap growing demand, bond experts say. France, for instance, has a new 50-year bond.

Asked if this might be something for the United States to consider, Bitsberger responded: "Fifty-year bonds are not on the table." Treasury focused on 30-year bonds because they "have an existing brand name for us. It is an established market," Bitsberger said. "Thirty-year bonds have a good track record in the marketplace and it just makes sense to stick to them."

The Bond Market Association, which urged the government to bring back the long bond, applauded the announcement.

Treasury needs to borrow to finance the daily operations of government, including meeting interest payments on the national debt.

This debt has swelled as budget deficits grew to pay for the president's tax cuts and fighting terrorism at home and overseas. The administration says the tax cuts helped cushion the blow of the 2001 recession and helped the economy recover from the downturn.

"Frankly, I think it was inevitable they were going to bring back the 30-year bond given the switch from surpluses to deficits," said Chris Piros, director of Prudential's Strategic Investment Research Group.

With the economy now on a solid growth path and tax revenues growing, the White House recently lowered its projection for the federal budget deficit for this year to $333 billion, down from an initial estimate of $427 billion. Last year, the government ran up $412 billion in red ink, a record in dollar terms.

The announcement on the long bond, which was expected, came as the department considered the government's financing needs, something its does on a quarterly basis.

To that end, Treasury said it will auction $44 billion in notes next week.

On Monday it will sell $18 billion in three-year notes, maturing Aug. 15, 2008. On Wednesday it will auction $13 billion in five-year notes, maturing Aug. 15, 2010. And on Thursday the government will sell $13 billion in 10-year notes, maturing on Aug. 15, 2015.

In other debt news, the department's "best estimate" is that the government in the first quarter of 2006 will bump up against the $8.18 trillion debt ceiling set by Congress, Bitsberger said. That would mean the government would probably have to shuffle finances to pay its bills until additional borrowing authority is provided by lawmakers.

Most experts believe the comeback of the 30-year bond will have little impact on demand for the benchmark 10-year Treasury note. "The 30-year used to be the bellwether. It is unclear whether it will get that status back," said Piros.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

[meekoil]

Next thing, force Social Security money into these, under the guise of "Personal Accounts".

I've got a "Personal Account" I want to put my SS money into, it's under my bed

[FoxV]

$this->bbcode_second_pass_quote('', 'W')ith the economy now on a solid growth path

[Kez]

$this->bbcode_second_pass_quote('meekoil', 'N')ext thing, force Social Security money into these, under the guise of "Personal Accounts".

I've got a "Personal Account" I want to put my SS money into, it's under my bed

[meekoil]

$this->bbcode_second_pass_quote('Kez', '')$this->bbcode_second_pass_quote('meekoil', 'N')ext thing, force Social Security money into these, under the guise of "Personal Accounts".

I've got a "Personal Account" I want to put my SS money into, it's under my bed

[bruin]

So would this put pressure on the 10 year note and thus mortgage rates?

[jaws]

Too bad the only buyer will be the Federal Reserve. Hahahaha!

[bruin]

Yes, that is right - since the Great Depression. Credit is evaporating folks.

When a bond is downgraded, many of the funds that hold them are forced to sell them. This in turn lowers the price and raises the interest rates.

There's something like 618 companies on the brink, representing $88 billion.

Expect mortgages rates to rise in the wake.

http://www.chron.com/cs/CDA/ssistory.mp ... ss/3387898

[rogerhb]

Cool. We're fixed for the term of our mortgage.

[BabyPeanut]

$this->bbcode_second_pass_quote('', 'r')adio broadcaster Clear Channel Communications are among 46 companies that probably will be categorized as noninvestment grade

[some_guy282]

Gee, I wonder what rising mortgage costs will do to the housing bubble?

[pilferage]

I wonder if interest rates will hit ~8-10%? It might be worthwhile for my mom to reinvest in another cd and take the penalty from pulling out of the current 3% one if that happens.