Closing Out 2009 In Style: Cash Management Bills Price At 0.000%
It is only fitting that one of the most schizophrenic years in recent capital markets history should close with a $5 million CMB auction pricing at 0.000%. And so the circle of chasing risky and risk-free assets with equal passion is now complete. Even as high yield bonds have returned over 50% YTD, investors can't get enough of parking cash in yield free US government-backed pieces of paper. Many have claimed this phenomenon is indicative merely of capital allocation ahead of January 1. Well, that is in a few hours. And with the next 4-week Bill/CMB auction likely to take place within a week, we will promptly see if this is indeed the case. If we end up with another 0.000% soon, then the structural problems at the near-end of the curve will end up being much worse than most have expected. That, and negative 1 month rates coming a-plenty.
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on Wed, 12/30/2009 - 14:44
#178050
Another sweet 0% auction.
Im looking forward to higher rates to come in Q1 and Q2 before hyper inflation kicks in, in which case i can only wonder what kind of rates we'll be getting. Q4 2010 anyone?
on Wed, 12/30/2009 - 14:57
#178074
the only thing we'll see is "hyper"-deflation.
US has capacity utilization at 70%, the consumer is already heavily in debt, unemployment above 9% for long time ahead, bank's balance sheets are only kept alive by Fed's QE - I don't think there's much more room to increase lending, and last but not least we have total credit contraction in the economy for the first time since the great depression...all this sum up to deflation at best, I don't see where you came up with the hyperinflation...
on Wed, 12/30/2009 - 16:18
#178211
Agree 100% but I'm not sure what the hyper in hyper-deflation means
on Wed, 12/30/2009 - 18:05
#178370
Cash is king, equities sink, gold hangs tough, services & gov't payouts decline, and eventually...
Inflation.
Might also be some shortages and rioting and reform along the way too, you never know.
on Thu, 12/31/2009 - 00:38
#178637
This is truth. Very succinct truth.
on Wed, 12/30/2009 - 18:22
#178384
Hyperinflation and inflation are really only nominally similar, as they are quite distinct phenomena.
Hyperinflation is more a currency event, not really just a monetary phenomena like inflation. Deflation and a hyper go together. Credit expands too much, bubble pops, asset deflation happens, firms collapse/teeter, g responds by pumping money, people and foreigners loose faith, malinvestment prospers and economy stagnates so firms need more propping up, less buyers for G debt, investors leave US dollar assets etc., rinse, wash and repeat.
More private lending is what is needed to save the exponential growth credit monster. It is collapsing and G is trying to keep it afloat. If the private sector credit doesn't pick up the G risks in effect burning up the currency trying to keep the scheme alive.
Hyperinflation in this context is caused by monetary panic in the face of credit/asset deflation. Maybe its avoided by a one time hyperinfaltion (a currency devalaution) but this system is not stable.
on Wed, 12/30/2009 - 14:45
#178052
hehe debt-free money :)
on Wed, 12/30/2009 - 14:52
#178064
After the commission or transaction cost, isn't that actually a negative rate? I've been sitting here wondering how I would explain to my client how wonderful it would be to purchase a Treasury Bill that pays 00.0%. Subtract out the transaction cost and/or my management fee and I'd have a tall story to spin.
Not only is there a fool born every minute but the current batch seems to be multiplying quite rapidly.
on Wed, 12/30/2009 - 15:41
#178149
Think of it as the premium on an Insurance policy. You are prepared to pay the premium not to make money, but to prevent losing it. If I was as sure as these investors on the ensuing risk in everything else, then I would do the same.
on Wed, 12/30/2009 - 15:58
#178176
So a short term Treasury Bill is more secure than a bank CD, particularly a 30 or 60 day CD, which while paying next to nothing, it's still paying more than 0% and is local and easy to grab quickly? Plus the worse that can happen with most CDs if broken early is you lose the interest. If you sell the Bill early and interest rates have gone up, you can lose principal.
I personally see this as the advisor not wanting to let assets leave the nest they control.
on Wed, 12/30/2009 - 16:14
#178205
CD's entail risk by bank insolvency. FDIC will cover up to $250K. I guess the spread between the CD (with FDIC guarantee) and the T-bill (with US Treasury backing) directly reflects the respective risk between government agencies.
on Wed, 12/30/2009 - 16:09
#178200
Tell you client that the faster he or she falls behind, the more time they have to catch-up.....
on Wed, 12/30/2009 - 17:14
#178296
you don't purchase this for a client
you purchase this if you're a MMF or a bank.
on Wed, 12/30/2009 - 18:28
#178396
I know. I was being rhetorical and sarcastic to some extent. But I've also been in a position on numerous occasions where a client wants to purchase a Bill or Note and the yield was so low I ate the transaction cost and still the client was yelling about the trickle of income.
Many people just don't understand that it's a two fold rape. The banks were bailed out and the taxpayer is paying for it in many "hidden" ways.
on Thu, 12/31/2009 - 20:53
#179568
I think most people are realizing it's rape period.... don't matter if it's two fold, a gangbang by Timmy, Zimbabwe Ben and Lloyd B is still a gangbang rape.
on Wed, 12/30/2009 - 14:55
#178070
Yeah, Japan's debt to GDP is a lot higher than ours.
And look at their paltry rates, pinned a generational lows for years on end.
For some reason, they cannot get the Animal Spirits going, no matter how cheap money is.
on Wed, 12/30/2009 - 15:22
#178118
I was watching a Youtube "Glenn Beck, I know Glenn Beck, anyway, an interesting analogy to the 0% parking is like in an earthquake when the safest place is in a doorway. The 0% is a perceived "safe place" before shit hits the fan.
on Wed, 12/30/2009 - 15:40
#178148
It's only fitting that Turbo Timmy, gets the same treatment at the FED window, as the TBTF's.
on Wed, 12/30/2009 - 16:06
#178187
I'm always amazed at the morons in the Bubblemedia who call the flight to real negative yield instruments "year end" window dressing even though that flight started in September. Maybe just maybe the alternative explanation that nobody trusts the corporates, equity or commodity markets because of instability in our banking system and government policymakers might just be the cause.
I'm just sayin'......
on Wed, 12/30/2009 - 16:22
#178219
I remember one time I dropped a tab of acid and wound up in a graveyard at midnight. It was hilarious and I don't know why, but man I had to laugh. It was like it was all a huge cosmic joke of the most EPIC proportions.
A Tragecomedy deluxe.
I'm having powerful flashbacks of that night right now.
-MobBarley
on Wed, 12/30/2009 - 16:25
#178225
High Rate = 0.000% What does it mean?
I do not get it, please some explain in simple language.
on Wed, 12/30/2009 - 17:55
#178360
Do as the rest of us did and read ZeroHedge until your eyes bleed.
Eventually, you will begin to understand.
:D
P.S. Thanks a mill for everything you do, Tyler and the gang! Happy New Year!
on Wed, 12/30/2009 - 16:36
#178244
OK, my forecast for 2010: neither hyperinflation nor deflation. What's ahead is STAGFLATION, like in the 70's. High (but not skyrocketing) unemployment rate (less than 12%), and relatively high inflation (but not hyperinflation - less than 15% annual inflation rate). And it's not only 2010. The following years will not be so different.
on Wed, 12/30/2009 - 18:08
#178375
I agree with that assessment.
For all the doom and gloom, it seems like the Feds have enough "superglue" to keep this racket together indefinitely. They can actually pull a lot of ropes at once and keep the gig defying gravity for longer than most people will stay solvent.
What happens then, say 2014-15, is that a new great technology (I am thinking a NatGas transportation system and its related components...) series of practical and universal inventions is created and exported from Ames, Iowa to everywhere else in the world.
In the meantime, the dollar swings like a pendulum every two and a half years against all the major currencies. Like a clock saying 'tick-tock.'
If you're not a 4X trader yet, you perhaps should look into it, because the next ten years or so of the re-stabilisation of the global financial system is going to bring more opportunities for the home-gamers than any other time in history.
The next decade will be the stuff of 4X legend.
Or not...
:D
on Wed, 12/30/2009 - 18:44
#178418
And that was DJIA in the stagflation era of the 70's:
http://grighter.files.wordpress.com/2008/06/djia-1960.jpg
Can we expect DJIA oscilating in the range between 5000 and 6000 points during the next 10 years?
on Wed, 12/30/2009 - 17:30
#178318
YOU KNOW WHAT THE GREAT THING IS? THE THE REPUBLICANS WHO GOT US HERE WILL GAIN A MAJORITY IN THE HOUSE IN THE MID TERMS. SO MY GUESS IS THAT WE ARE REALLY FUCKED
on Wed, 12/30/2009 - 18:07
#178373
Pry the gum out of your caps lock and vote independent.
on Wed, 12/30/2009 - 23:08
#178599
Stupid Republicans will neutralize stupid Democrats. Hopefully, it will be more difficult to pass any additional legislature because I'm worried.
on Wed, 12/30/2009 - 18:02
#178365
So my question is will long bonds and stocks be able to rally simultaneously in the new year?
I doubt it.
on Wed, 12/30/2009 - 18:06
#178372
as long as the infamous "household sector" hangs in there!
on Wed, 12/30/2009 - 18:16
#178381
Well either way, none of us will really know until 5 days from now. Damn, this is going to be an interesting new year. At this point, we've fleshed out a lot of both sides of the argument... sorry to those I offended and thanks to those who argued either side... it's the discussion that's important.
on Wed, 12/30/2009 - 22:11
#178571
I hope it's gonna be a FAZerrific new year