Thursday, November 20, 2008

3.44% for 30-years? Where do I sign up!?!?

Okay, someone is obviously short the long-bond and can't find a buyer, because not only did it rise 5 points during the regular session, it rose another 4 points after 4PM. Up 9+ points on the day. The yield is a paltry 3.44%

As a tax payer, I demand the Treasury immediately offer to sell as many bonds as the market will bear at this level. I also demand that the Treasury sell any maturity of T-Bills at 0.01% in unlimited quantities. If the public wants to just donate their money to the Treasury, I insist the Treasury take it.


GS751 said...

Lmao thats great.

Sergei said...

U must mean that someone is short the 30-year long bond and cannot find a SELLER, not a buyer?

Lockstep said...

Here here.

ccm said...

I'm curious. Why shouldn't Treasury let nominal yields on T-bills go negative?

People say that this would cause all kinds of problems, but, aside from forcing money market funds to invest in Agencies, what problems would be caused by negative nominal T-bill yields?

Accrued Interest said...

No one will buy T-bills at or below zero. The other day the offer side on certain t-bills was negative on my screen. So I went in with a fake order for 1mm to see what actual offerings I'd get. Nada. Tried four different issues. No actual live offering came.

Sergei: Yes. My bad. Wrote the post too quickly.

Jonathan said...

AI: I wanted to know your thoughts on what it means for the Treasury to be able to borrow "for free" in relation to its prior debtor obligations. As an entity takes on more and more debt, we would expect the required yield on such debt to increase; this prevents the debtor from "borrowing his way out of debt" by paying off debt with debt.

Currently, we have the opposite situation. My question is: why doesn't the treasury take advantage of its current near-free borrowing and insatiable demand to arbitrage its debt burden?

The only answer I can think of is they plan on issuing incredibly huge amounts of debt soon, and don't want to saturate the market. Would like to know your thoughts.

PS: I'm fishing for a response to this, so I posted this comment verbatim to JJJ's and Brad Setser's blogs, so don't get offended if you read those and see the same post there :)

Jonathan said...
This comment has been removed by the author.
Accrued Interest said...


Consider this. The Fed just announced it was buying $600 billion in Agency MBS and GSE debt. Currently 3-year agency bullet debt yields around 2.7%. 5.5% MBS yield around 5% depending on prepay assumptions.

Isn't the government effectively refinancing FNM and FRE's debt at lower cost? As tax payers, isn't this an arbitrage for us? We own Fannie Mae and Freddie Mac!!!!