Posted on 01/28/2011 5:55:47 AM PST by Palmetto Patriot
Treasurys maturing in the next seven to 30-years fell Thursday as investors prepared for a seven-year Treasury sale and after Standard and Poor's lowered its rating on Japan's sovereign debt.
Treasury traders said that ratings agency S&P's downgrade of Japan's long-term credit rating to AA- from AA was helping to put pressure on longer-term U.S. government debt, which sold off sharply Wednesday. Seven- to 30-year Treasurys weakened Wednesday after the Federal Reserve pledged it would continue with its $600 billion bond buying program, triggering fears about the possibility of eventual runaway inflation in the U.S.
Thursday's news on Japan added to the selloff as some investors began to mull over the possibility of the U.S. potentially being downgraded as well. The U.S. is grappling with a bloated budget deficit and hasn't put concrete plans into action to significantly reduce its debt.
"The Japan downgrade is partly to blame for the steepening of the curve," said James Combias, head of U.S. Treasury trading at Mizuho. Combias said he believes the U.S. is vulnerable to a downgrade in the next couple years if it does little to clean up its balance sheet.
"The potential [for a downgrade] is there," he said.
(Excerpt) Read more at online.wsj.com ...
We still don't have a working majority of voters ready to accept the awful budgetary truth-- we need massive slashing of government spending coupled to fundamental entitlement and pention reform.
At present rates and trends of spending, there are literally not enough dollars in existence to pay for all of the promises of our state and local governments in the out years. Social Security is going now going into a deficit as far as the eye can see this year.
I have been predicting the non-electoral overthrow of an EU government this year. If Obama and the Democrats regain full control in 2012, we will have a revolution by 2025.
Bernanke knows we are on a runaway train. He is just stoking the engine.
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