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For Second Time In A Row, One Month Bill Auction Closes At 0.000%
This is the second time in a week that a bill auction has closed at exactly 0%. The Treasury has auctioned off $57 billion since December which is yielding absolutely nothing. Surely, this can go on forever. In fact, can the US reverse roll all of its $7 trillion in marketable securities in the form of 1 months? That would surely help the deficit as no interest has to be paid by the US. Ever.
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If you have deflationary expectations why wouldn't you just hold cash? I see no reason for anyone purchasing bonds with a 0% yield unless it is the Fed. Someone please give another logical reason.
I think you hit it on the head. It has to be the Fed or some of its shills.
Investment dealers work directly with the Fed (bigger than institutions, think Dealer->Institution->Retail) and they have to place bids no matter the yield. Each major bank has its FI desk, as do dealers who solely deal with treasuries. Those are your usual suspects.
Exactly. It's proof-positive of the fraud our government is perpetrating. And even a total moron like me "gets it". Why doesn't everone else see this?
I don't see this as proof positive at all. There are numerous people who are predicting a rally in the dollar and a fall in the market. Parking in Treasuries is a safe way to wait out that turn of events.
Note that I personally believe that the US dollar will blow up via hyperinflation. But the road from here to there is not straight up, which is why gold is pulling back too. Look at the ten years from 1929 to 1939. That wasn't straight down either, with many bear rallies during that depression. You'll see the same thing in commodities during the depression - ups and downs.
Thus, for people expecting another leg down in the deflationary first phase of this financial crisis, this makes complete sense. The grand finale, the inflationary blowoff, is still waiting in the wings. It's not gone but it's not yet time for it to take center stage either. And I doubt it will take center stage until we've seen far more toxic waste surge to the surface and come into public view.
except buying 1 month bills doesn't allow one to wait out for the events you mentioned to play out
if you have enough capital to actually impact treasury rates, you're not going to withdraw it in paper or hold it in a $250k fdic insured account
Some people are just so willing to the money to the .gov, because they can't trust themselves not to do something stupid with it......
So they do something stupid with it anyway and give it to the government.
Or it might be money managers who don't want to tell their clients they are holding cash and continue to expect to be paid...
You mean Bills with a zero percent yield?
Hard to take deliver of a trillion dollars in
either gold or paper.
Bank Holiday Boyz.
Rats deserting ship of state.
Resulting in awesome backwardization.
This building since fractional banking began.
The banks tie people up with borrowed money usury,
deflate it, and foreclose assets at pennies on the dollar.
Nothing new under the sun.
This time with 125% DiTech loans, expect assets
to sell below 1930s prices...
You mean Bills with a zero percent yield?
Hard to take deliver of a trillion dollars in
food, gold, oil or paper.
Another Bank Holiday Boyz.
Rats deserting SOS Ship of State.
Results in awesome backwardization.
Building since fractional reserve Fed banking
began.
The banks tie people up with borrowed money usury,
deflate it, and foreclose assets at pennies on the dollar.
Nothing new under the sun.
This time with 125% DiTech loans, expect assets
to sell below 1930s prices.
In the land of turned off ATMs and internet banking, the
man with physical cash is king...
You mean Bills with a zero percent yield?
Hard to take deliver of a trillion dollars in
food, gold, oil or paper.
Another Bank Holiday Boyz.
Rats deserting SOS Ship of State.
Results in awesome backwardization.
Building since fractional reserve Fed banking
began.
The banks tie people up with borrowed money usury,
deflate it, and foreclose assets at pennies on the dollar.
Nothing new under the sun.
This time with 125% DiTech loans, expect assets
including gold to sell below 1930s prices.
In the land of turned off ATMs and internet banking, the
man with physical cash is king...
You mean Bills with a zero percent yield?
Hard to take deliver of a trillion dollars in
food, gold, oil or paper.
Another Bank Holiday Boyz.
Rats deserting SOS Ship of State.
Results in awesome backwardization.
Building since fractional reserve Fed banking
began.
The banks tie people up with borrowed money usury,
deflate it, and foreclose assets at pennies on the dollar.
Nothing new under the sun.
This time with 125% DiTech loans, expect assets
including gold to sell below 1930s prices.
In the land of turned off ATMs and internet banking, the
man with physical cash is king...
Cash as currency notes - requires expensive storage and security, can be destroyed in case of fire, flood, etc. I am talking big amounts, not the amounts you would hold in your home.
Cash in checking/savings account - matter of FDIC limit, and now that FDIC is broke, anything can happen. And what if your bank fails.
Cash in t-bills - in your name, redeemable for cash, storage taken care of.
A 0% interest rate only means deflationary outlook for the short term.
Well, and where exactly do you keep your cash if you don't have an account with the Fed? It may be too much to stick under a mattress :)
So, there's no alternative but to buy T-bills at par...
"Veni, vidi, lefti!"
Is 0% a taxable?
Paul-
If you have $20,000, holding cash is not a problem. If you have $20 million, it's a problem. Where do you put $20 or $50 million if you want safety. Yeah, some of in gold is great, but you can't put millions in the bank and be covered by the FDIC and you can't put millions of FRNs in a home safe. Your only "safe" holding become US T-Bills. When your goal is to preserve what wealth you have, T-Bills and gold are a great combination, no matter that both pay 0% interest.
Thx for the explanation #s... Like Paul I always wondered why investors would do that...
Yep! Remember the movie "Brewster's Millions"? $30M takes up a whoooooole lot of space.
i don't think anyone would believe federal reserve notes are not losing value. its hard to tell because of the fudged numbers, secrecy, and manipulation, but the paper notes probably lost around 40% of value the last year alone. and historically about a 35 fold decrease in value since '71. even bad real estate will get a couple of percent at least, plus protection against loss of reserve note value. all this is surely just federal reserve purchases.
There are trillions in ARM loans about to reset and most likely default. Also most likely causing a LOT of short term deflation due to asset depreciation.
Thx numbers.
I think its probably a mix of year end window dressing and other managers that dont feel the market is rigthfully priced so they decide to stay in cash. Corps and muni bonds are extremely expensive and people continue to pile up using leverage. haircuts are around 10% for munis. only 20bps over agy funding. its a hell of a carry...until it implodes that is.
How about individual states? Here in Canada our provincials trade roughly 100-200bp over our federal bonds, talking about 2yrs.
0% Yield + Transaction costs
I don't care how good someones promise is.. I would never pay someone to borrow my money. Is this what the twilight zone looks like? Are we now experiencing glitches in the Matrix?
As long as there is deflation you're actually "earning" money in real terms at 0% nominal interest. And the good thing is, there's no tax on it :)
Yes for large holders who don't want to be considered drug dealers this is a good parking spot.
The indirects are in for $5 billion. That's a roll for the furriners, while they figure out what. to do. Beyond that, my guess is that the above is right, it's a safety play by Primary Dealers, who don't trust the solvency of themselves to store the money, and so give it (back) to the Fed to hold for them. And yes, this certainly does seem like a real healthy situation, business as usual. Isn't it exciting, folks, to be witnesses to such profound changes? Have you read Karl today? About the vanishing participation of foreign buyers, and Congress pulling back on its debt limit raise in an effort to simulate "responsibility?" Things are...definitely...in...flux.
Comes to ~19% for the indirects.
Lower each auction if im not mistaken...
As for reverse rolling the $7 (soon to be 8?) tril into zero percent bonds, one problem might be that 4-1 direct vs. indirect ratio showing up here. Little top heavy, ain't it? Can 0% generate the kinds of bonuses the Boyz need?
Zero percent interest. Funny that.
Gold WAS $350/oz in 2003. Now it's $1100 or thereabouts.
For something that doesn't pay zero interest, it's doing pretty damn well.
-MobBarley
I don't think you can park 57 billion in gold. It would be something like 1500 tonnes of gold.
Only 56% were at "the high" so 43% were literally negative.
You can put up to 50mm in an insured product called CEDARs. It is back by FDIC.. you max out your insurance limits on CDs. You basically own 200 different banks.
As you said, it's backed by the FDIC... so why bother. If you want to put your cash at risk, why not give it to one of the 2big2fail players for some more carry. Would be at least as "safe" as with the FDIC.
If you don't trust equities and gold is sliding down where do you stash your profits over the holidays?
this makes no sense.
instead of putting huge amounts of capital in treasuries at zero (or negative) percent, they should be putting it in the US equity market. Every one of the big banks has said the spx will be between 1200-1350 next year. why not get a guaranteed 10 to 15% return in the spx vs. 0% in treasuries?
surely, our banking system analysts couldn't all be wrong could they?
i'm thinking David Bianco for Geithner's replacement. or Abby Joseph Cohen?
It makes perfectly good sense-- those that have had access to the Fed window have already been able to borrow at 0% and front run the rest of us by participating in the equity casino game. Why else would the SPX rally for day on end on low overall volume?
Little wonder that the Big Bank analysts are targeting 1200-1350 on the SPX... if they can get the retail investor to "bite" at much lower risk spreads by implying a 10% to 15% guaranteed return, the Big Banks can cash in at even greater profits.
That's why I love Abby Joseph Cohen the way I do. Ooooooh.... criminally sexy.
Well there is a huge danger in speculating in equities in very large amounts. When you start to move up in the amount invested in equities beyond $10B. From a cross section standpoint, to some extent you are driving the market.
The power to influence market behavior, for big holders of stock, is akin to leverage, it can work for you or against you, even if you are hedged to some extent. If the market, goes south, lets say for an external crisis of some sort, and the big holders try and exit on specific over-valued shares the price will quickly decline. The more they sell the greater the downward price pressure.
The safe bet would be to keep your reserves at the FED and collect your interest.
Mark Beck
i was being sarcastic and perhaps i wasn't clear.
your points are well stated mark.
In this environment where we control the interest rate on our short term debt (how long can this last?), infinite debt is possible with an almost vertical parabolic debt curve.
Glen Beck had something on the 1,3 and 6 rule from johngaltfla.com
http://www.treasurydirect.gov has been my largest position since March last year.
I've been waiting for attractive opportunities in commercial real estate.
But I don't feel any nearer than I did then - this all may go on a long time, meanwhile I am earning zero interest in a depreciating currency.
Can you say....capital flight?
this must be mindbending for all you HYPARINFLATIONIONISTS
must suck to have a preconceived version of events and have to find some way to fit all this new info around it