Commentaries

Now you can get inflation protection for the (super) long haul

November 4, 2009

Treasury announced that it’s tweaking its TIPs program so investors can get inflation protection for 30 years rather than 20 years. It will certainly make break-even calculations much easier since the government doesn’t sell regular run-of-the-mill Treasurys with 20-year maturities.

Oh, where has all the convexity gone?

October 12, 2009

The rise in U.S. Treasury yields has been very impressive considering where stocks are – the Dow is just 80 points away from 10,000 – and the improvement in economic data.  But it’s even more incredible that it happened without the aid of investors in mortgage-backed securities and mortgage servicers that typically snap up longer-dated debt like U.S. Treasuries and swaps to hedge their portfolios when interest rates fall sharply. It’s known as convexity hedging, and it was a powerful accelerator in the U.S. Treasuries market in 2002 when the Federal Reserve was pushing rates down. (It also works the other way. When rates rise suddenly, it forces mortgage investors to quickly start selling longer-dated debt.)

Not looking hot on the jobs front

October 2, 2009

Data just out shows the pace of joblessness picked up in September, snapping what had been a steady improvement from “really terrible” to “at least it’s not as terrible as the prior month.” The drop in non-farm payrolls was even worse than Goldman Sach’s downwardly revised -250K forecast, coming in at -263K. But also take a look at July: revised to -304 from -276k. August was revised to -201K from -216K.

A compelling case for carry in Treasuries

September 11, 2009

Under normal circumstances, U.S. Treasuries should probably be getting clobbered.

Too much Treasury supply to bear?

September 9, 2009

Treasury’s auction of $20 billion of 10-year notes – the second in a three-part $70 billion fund raising effort this week – drew in some aggressive bidding, but the broader market is having problems finding its footing in the aftermath.

Job declines slow, but unemployment rate jumps

September 4, 2009

The Labor Department’s August report on the jobs market has a bit of a good news/bad news slant to it. Job cuts slowed to “just” 216K, below expectations and better than last month’s 276K (up from the originally reproted 247K). But the unemployment rate, which is calculated through a distinct survey of households rather than businesses, jumped to 9.7% from 9.4% the previous month. You’ll remember that a slide back in July made some hopeful that maybe, just maybe, joblessness has stabilized.

That didn’t take long…

September 1, 2009

Turn the calendar to September and markets are fixated about potential problems at the banks again. The obsession with September being a bad month for stocks and for the world in general has nothing to do with it, I’m sure.

Treasury yields not adding up

August 26, 2009

What is going on with U.S. Treasury yields? Can nothing nudge them from their current low-laying perch? Something seems very out of whack, but let’s just agree not to call it a conundrum.

Fed MBS tally jumps to $766.6 billion

August 20, 2009

The Fed may be paring back its Treasury purchases, but its MBS program heated up this week. The central bank bought a cool $25 billion net, up nearly $5 billion from the previous week. Reuters puts the running tally now at $766.608 billion.

Treasurys not looking so boring anymore

August 18, 2009

Government securities are not the most exciting investment choices in the best of times, but it looks like U.S. Treasurys are coming into their own, which is good news for the federal government and its financing costs.