Posted on 11/30/2023 5:49:08 AM PST by Diana in Wisconsin
Nobody wants U.S. Treasury bonds.
Once a symbol of America’s economic might and accepted as a global coin of the realm, they have fallen badly out of favor, with serious consequences for taxpayers, investors, and financial markets.
Elementary economic forces — too much supply and not enough demand — have collided to create the worst stretch for U.S. government bonds since the Civil War. The government keeps borrowing to cover its budget deficits, while once-reliable buyers of that debt, both at home and abroad, have pulled back.
The result: Investors are demanding the steepest yields since 2007. Auctions of fresh bonds that were once routine are now going terribly. And bond portfolios are getting absolutely hammered. The longest-dated Treasury bonds are in a bear market worse than the dot-com bust and almost as bad as 2008.
The government is borrowing more than expected, increasing the supply of Treasurys and dinging their value. Meanwhile, the Federal Reserve is selling down its own holdings, dumping yet more bonds into a market that doesn’t really want them.
“There’s just a lot less demand than there was even six months ago,” Goldman Sachs’ Jim Esposito said last week. “You can buy a 6-month T-bill that’s yielding north of 5%. Why wouldn’t you buy that instead of a long bond that’s yielding 4¾?”
Already 2.5% of the U.S.’s economic output is going to service its existing debts, a number that some analysts expect to hit 4% by 2030. Already running huge deficits, the only way for Treasury to pay the interest — along with ambitious spending programs like the CHIPS Act and student-loan forgiveness — is to keep borrowing.
But from whom?
China and Japan, once reliable buyers of Treasury bonds, have been selling them to prop up their weakening currencies. A decade ago they held more than 22% of U.S. government bonds; today it’s 7%.
The Ukraine war has dampened demand among Eastern European buyers, said Steve Ricchiuto, the chief U.S. economist at Mizuho. Increasing U.S. oil production means fewer petrodollars in the Middle East to be reinvested through the Treasury market.
U.S. banks, too, are stepping back.
During the pandemic, they parked a flood of new deposits in government bonds because they had nowhere else to put them. Demand for loans was light. Now that deposit glut is easing and businesses are borrowing again.
Plus, many are sitting on the same paper losses on Treasury bonds that brought down Silicon Valley Bank this spring, and are disinclined to load up on more. Bank of America, which has $132 billion of unrealized losses, has sold half its Treasury bonds this year.
(Pros & Cons of buying T-Bills continues at the link.)
It’s by design. It was done to utterly destroy this nations wealth in an effort to usher in the totally government controlled population for the express purpose of the long held globullists desire to subjugate the entire worlds population and create a permanent royal class at the top with 99% of the rest relegated to serfdom and slavery.
^^ THAT ^^
That 4.75% coupon is literally worthless at maturity with this high inflation.
I just bought 17-week treasuries at just over 5%. Where else can one do better in something that's relatively liquid, especially considering that the 5% interest is exempt from state tax?
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Short term treasuries are ok. But you have to be on a suicide mission to invest in 30 years bonds. Not only will escalating interest rates and inflation clobber the holder, but never expect to see a credit rating uptick in treasuries. We are on a constant roll of a declining rating to junk status as the debt drives us into insolvency
bttt
Claims to be “non-partisan,” but is a ring-leader for centralized control.
Agree—great move for capital preservation.
We can profit from .gov evil and stupidity.
As long as you stay short term you can ride the wave wherever it goes.
Stocks are still good, if rates slip I'd prefer 2-5 year notes.
“Claims to be “non-partisan”
There is a cartoon out there showing sheep being herded by two bordie collies, one on one side of the field and the other on the other side of the field.
We are the sheeple. The two political parties are the border collies. Heads they win tails we lose.
I forgot to mention the farmer.
If you believe the farmer is real you are a “crazy conspiracy theorist” sheep.
“Nobody wants US Treasuries”
Complete nonsense.
To the contrary, in the last few weeks the US Bond Index rose from 107 to 115.
So someone seems to want to buy US Bonds.
I’ve got a bunch. 1, 3, and 6 month. Pretty easy to set up a ladder on Treasury Direct. I’ll take the 5.5% for now.
Tax-free Muni bonds. States and cities are highly motivated to pay healthy yields, even if everything else goes into default, because those yields are just a fraction of the principal they can use.
So find a respectable bond fund and solely invest in Munis.
Eating our seed corn…….
Exactly. We have a couple of different variations in T-bills...all 5%+. Not a perfect scenario but, at our age, we hesitate to put cash in riskier investments. Stock market is on a roll right now...but it could’ve just as soon gone in the other direction. No state tax on T-bills is a modest but pleasant little kicker. Saves us about 5% on the interest earned. The short-term nature of T-bills is another nice characteristic. So far, we’re just rolling them over.
Bond ladder. Yep, that’s the way we’re doing it.
I actually called the TreasuryDirect toll-free number last night regarding a new “savings” acct I set up at our credit union to deal with the bonds. Dialed the number about 4:30pm, tapped a few choices on their telephone menu and a real live human being answered in no time. Very helpful guy.
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