US Treasuries slide as fears of new debt resurface

[UpInArms]

http://www.reuters.com/newsArticle.jhtml?storyID=3407934

NEW YORK, Sept 8 (Reuters) - U.S. Treasuries slipped on Monday as relief at a smaller-than-expected debt auction was overtaken by an awareness that the government's ever-widening budget deficit would sooner or later take a toll on bonds.

<snip>

President George W. Bush raised the financial stakes on Sunday when he used a national address to ask Congress for another $87 billion for the U.S. military and reconstruction in Iraq.

The figures were daunting even for traders accustomed to dealing with lots of zeros.

"We're talking a, what, $500 billion deficit this year, and that's a lot of money in anyone's language," said one trader at a U.S. primary dealer, noting it was roughly equal to the entire Gross Domestic Product of Australia.

"And last week's dive in yields complicates things. We don't know whether the improvement in overall sentiment will give buyers confidence, or whether the jump in prices will scare them off," he added.

...more...

what? are the marketeers have a moment of wakefulness?

[aquart]

1. Is this the second time they couldn't sell the bloody things?

Anybody here believe boy George would NOT default on our treasury obligations?

You know what? I want a man who knows where money should go. I want Gore off his ass and doing the job I elected him to. (Never thought I'd say that, but the money is worrying me.)

Enough of this.

[The Zanti Regent]

3. Remember the GOP's Master Plan!

The GOP WANTS a LOT of Red ink because they want to eliminate Social Security and Medicare.

Running 500 billion PLUS deficits for the next five years WILL eliminate Social Security

By the way, I am waiting for the Churches to do something for the needy, which they won't...

[gasperc]

10. which is a joke, since SS is still in surplus by $120billion

so it seems they are waiting till that flips then they'll balme the entire deficit on SS.
Dems should demand complete seperate accounting of SS and the general budget so it'll stop getting raided and for those IOU's that'll never be paid back anyway just make it a pay as you go program or have the surplus reinvested into individual IRA accounts for all retirees which would reduce the tax requirement in the future.

[DulceDecorum]

11. Let us say grace

before we eat our bowls of Soylent Green.

[kysrsoze]

4. And why is the market going up?

With that speech last night, the only thing going up should be Halliburton, Carlyle, Shell and Raytheon stock.

[NJCher]

2. all the PR in the world isn't going to help "TopGun"

Financial people don't care about Georgie's PR team, his lipstick, his screwed up face or his TopGun costume. A financial train wreck being driven by TopGun is still a financial train wreck.


Cher

[benfranklin1776]

5. Yep.

It just that with the flight suit cowboy at the helm the wreck happens a whole hell of a lot faster. We are plunging at warp speed into a financial black hole and Scotty is no where to be found to bail us out with a last second miracle. Amazing to think isn't it that a short time ago President Clinton was talking about PAYING OFF the national debt, ALL OF IT. Now we are being viewed as a deadbeat nation being lectured to by the IMF. So much for the great financial acumen that our first MBA President was supposed to bring to the nation. WHATTA JOKE!

[teryang]

6. They are trying to stave off the collapse

...until after Nov. 2004. The recent advances in auto sales and homes is driven by the realization that inflation is on the way. Get em now folks while their hot. Tomorrow you won't be able to afford them. Inflation favors debtors unless you are on an adjustable. Buy with debt and pay it back with cheaper dollars. It is the only game in town. Force people to buy because there is nothing else to take into the future except real assets. Savers are being screwed to the wall. I think treasuries and bonds will decline in value substantially within a year to 15 months. I agree with Ron Pauls prediction of stagflation.

The ironic thing is that I anticipate a longer term trend of wishing to dump real estate assets to avoid ad valorem state and local taxation which is skyrocketing based upon Federal fiscal policies and inflated home values.

[Turley]

7. Well.............

I dunno, I kinda think high car sales are based on record-high incentives and that high home sales are on record-low (historically speaking) interest rates.

[teryang]

8. I agree

...but people are trying to hedge and leverage by taking on more debt than is wise betting along with the current government that the numbers are meaningless because you can't get a fair return on money anyway and inflation is already here because the printing presses are rolling 24/7 to finance a government debt that is unprecedented in the history of the world.

Under such circumstances, the risk of illiquidity isn't that scary because the current economic conditions of watching your savings wiped out has already occurred and is still underway as a result of inflationary pressures and political manipulation of monetary markets. It's not just that rates are low. There is no other game in town. Might as well live paycheck to paycheck like everyone else. It is a form of giving up. A meltdown in reverse. People who are financially conservative but not well off aka the middle class are giving up. A lot of people who buy new homes and new cars now without substantial down payments are headed for bankruptcy. As Rep. Ron Paul noted during this alleged growth bankrupties are at an all time high.

The lenders down even ask you to fill in the substantive info on the financial applications. They just ask you to sign on the bottom line.

[Turley]

9. Unprecedented?

Hate to sound picky and I'm in no way defending Shrub's "don't tax and spend" policies, but our debt isn't unprecedented. We're still lower in terms of debt/GDP ratio than the Europeans or Japan. I assume your "printing presses" comment refers to a loose policy by the Fed but I'm not entirely sure I'd fault them. They've done the best they could with the cards they had to play.

I do agree whole-heartedly on the personal bankruptcies prophecy.

[teryang]

12. I've heard it phrased that way before, as well

I hope you are correct. I would like to be sanguine about the current debt levels but I find it disturbing. When you refer the GDP ratio I assume you are referring to governement deficit spending. Are general expenditures paid for with SS revenues included in government debt figures? I don't think anyone really knows what the total government debt is. There is a lack of accountability for government spending that is staggering from my point of view. To a certain extent it is a shell game which depends on psychology more than anything else but that is just an opinion. I don't know. I don't mind anyone being picky, it might help me understand what is going on better. I'm concerned about commercial and private debt levels as well as government debt but I'm not an economist. I'm not against deficit spending per se but I am when the money is just frittered away on cronies and on heedless foreign failures.

I am thinking back to the stagflation after the Vietnam war had dragged on for some time. I think its obvious that banks are expecting a return of higher interest rates. Fixed rate mortgages are non assignable by buyers like they were then. What do you think will happen when interest rates go up? Or do you think they will go up gradually/insignificantly? I don't think that people are going to loan tens of thousands of dollars for new cars without asking questions after Nov 2004. I expect interest rates to rise immediately thereafter. The timing of the bottom of rates may not work but they will make a try for it to keep their favorite corporatists in power.