Treasuries now reaching 3%

Deflation, inflation, it really doesn't matter. The price for money, that is interest rates, is going up. You can see it in the back month contracts in the futures market. You can see it in the failed auctions for foreign debentures like the Gilt in the UK. Investors/lenders are demanding a higher rate for loaning out money. The banks may be lending, but it's still a capital desert out there. We were at historical lows, not seen in decades.  Folks, it was not always going to stay that way. The benchmark 10-year, Bloomberg is reporting, the yield is now going up.  The Federal Reserve may be attempting to buy up some debt, but the fact remains that more of it is still going to come online.  So long as we're on this runaway train of borrowing, the cost for money will have to go up. 

excerpts from the Bloomberg article:

April 25 (Bloomberg) -- Treasury 10-year notes fell, pushing yields above 3 percent for the first time since the Federal Reserve announced a plan to buy U.S. debt, as investors focused on $101 billion in note auctions next week.

The benchmark 10-year security dropped for the fifth straight week as record U.S. debt sales overshadowed the buyback program the Fed unveiled on March 18 to drive down consumer borrowing rates. The 30-year bond yield rose to the highest since Nov. 20, while the gap between yields on two- and 10-year Treasuries approached the widest since November as investors demanded greater compensation to lend to the government for longer periods.

“Supply definitely continues to be a factor,” said Adam Brown, director of Treasury trading at Barclays Capital Inc. in New York, one of 16 primary dealers that trade with the central bank.

The yield on the 10-year note increased five basis points, or 0.05 percentage point, this week to 3 percent, according to BGCantor Market Data. The 2.75 percent security due in February 2019 fell 3/8, or $3.75 per $1,000 face amount, to 97 29/32.

The benchmark note’s yield had held between 2.46 percent and 2.99 percent since March 19, the day after the Fed said it would buy up to $300 billion in U.S. securities over six months.

The Treasury will auction $40 billion in two-year notes on April 27, a record $35 billion in five-year securities on April 28 and a record $26 billion in seven-year debt on April 29. It is scheduled to announce April 29 how much it plans to raise in sales of three-, 10- and 30-year debt in the first week of May.


The U.S. needs to raise $3.25 trillion this fiscal year, according to primary dealer Goldman Sachs Group Inc. President Barack Obama has already increased the U.S. marketable debt to a record $6.27 trillion as he borrows to try to snap the recession.

Fed Chairman Ben S. Bernanke more than doubled the central bank’s balance sheet in the past year to $2.2 trillion by purchasing financial assets including Treasuries as he tries to revive credit markets after a rout in 2007 and 2008.

The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, narrowed to 97 basis points yesterday, from 1.35 percentage points at the end of 2008. It averaged 36 basis points in 2006.


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