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Put your millions in 10 year UST's and fire up the bong.

By MisterLefty following x   2018 May 16, 4:03am 478 views   10 comments   watch   sfw   quote     share    


10-Year Treasury Note Closes Above 3% And The U.S. Dollar Gets Stronger

Summary

The yield on the 10-year U.S. Treasury note has been teasing the 3.00 rate for some time now, and finally on Tuesday seemed to cross over to a higher level.

Having this yield above 3.00 percent only seems right as the Federal Reserve attempts to raise short-term rates to "more normal" levels, while it continues to reduce its securities portfolio.

But higher rates will result in a stronger U.S. dollar, and this is exactly what was seen on Tuesday as Treasury yields moved upwards.

Well, the yield on the 10-year U.S. Treasury note finally broke through the 3.00 percent barrier and looks like it could stay there. The note closed on Tuesday to yield 3.07 percent. Now we will have to see whether or not the yield remains above the 3.00 percent level.

Breaking down the yield into a real yield and expected inflation, we find that the yield on the 10-year Treasury Inflation Protected securities closed at 0.89 percent. The 10-year not had not closed to yield this much since September 6, 2013, and then one has to go way back to April 14, 2011, to get this high a yield for the 10-year TIPs.

In terms of inflationary expectations, the breakeven yield came in at 2.18 percent on Tuesday. In the first half of May, inflationary expectations averaged 2.17 percent, so there one could argue that there has been no shift in expected inflation to get the higher nominal yield.

In fact, there has been little shift in 10-year inflationary expectations over the past four to six weeks. At the current time, I don’t expect any new information coming to the market that would change expectations from current levels.

Thus, for the nominal yield on 10-year Treasury notes to remain at 3.00 percent or above, the yield on the 10-year TIPs will have to move up. What is possibly in store here?

Well, officials in the Federal Reserve system have stated that they would like to return short-term interest rates and the Fed’s balance sheet back to “more normal” levels. In order to do this, Fed officials have signaled that they would like to raise their policy rate of interest at least two more times this year, but might also consider one more increase before the end of the year. This would make the target range for the Federal Funds rate 2.25-2.50 percent.

https://seekingalpha.com/article/4174557-10-year-treasury-note-closes-3-percent-u-s-dollar-gets-stronger

1   HEYYOU   ignore (17)   2018 May 16, 9:22am   ↑ like (0)   ↓ dislike (0)   quote        

How does a constantly changing fiat currency have any value?
'A sucker is born every minute.'
2   adarmiento   ignore (0)   2018 May 16, 9:48am   ↑ like (1)   ↓ dislike (0)   quote        

Too many variables and factors to make conclusions, especially in terms of geopolitics. Technology such as improve drilling methods can compensate for geopolitics and keep the price of gasoline below $3 a gallon. I'd be invested now in Vanguard Energy ETF.

Bottomline, what is trend for the median disposable income for a median household (i.e., after housing, food, medical insurance/expenses, utilities, tuition and car payments) ?

What is interesting is how the dollar is strengthening while the US debt to GDP ratio is not decreasing. Also, even though China and Russia as well as other major state actors are trying to undermine the dollar for several years in regards to international trade (i.e., oil futures), that the effect has not been seen on the value of the dollar.
3   MisterLefty   ignore (0)   2018 May 16, 9:52am   ↑ like (0)   ↓ dislike (1)   quote        

adarmiento says
What is interesting is how the dollar is strengthening while the US debt to GDP ratio
Dollar is strengthening as demand for dollars increases as return on UST's increases.HEYYOU says
How does a constantly changing fiat currency have any value?
If you feel that way, please throw all of your flat into the fireplace and light it up.
4   adarmiento   ignore (0)   2018 May 16, 10:02am   ↑ like (1)   ↓ dislike (0)   quote        

HEYYOU says
How does a constantly changing fiat currency have any value?
'A sucker is born every minute.'


Hey you, "HEY YOU", then what is the reasonable alternative ?

OK, if you were able to buy a "television set" (i.e., color tv, etc.) with a 1 ounce gold coin back in 1967, then you can buy a more improved "television set" (i.e., curved screen, 70 inch, etc.) with the same 1 ounce gold coin today. In 1967, gold was $35 an ounce, and today it is $1290 an ounce. That is about a 7.25% annual appreciation for gold since 1967.

Hey you, Senor Lefty, OK, so there is a flight to bonds that pay a have a greater rate of return, which strengthens the dollar. For one matter, this works out good for the Federal Reserve which is selling off its bond holdings.
5   NuttBoxer   ignore (2)   2018 May 16, 11:16am   ↑ like (0)   ↓ dislike (0)   quote        

adarmiento says
Hey you, "HEY YOU", then what is the reasonable alternative ?


The best alternative is barter, cut out the middle man entirely. You typically have to settle for second hand in this case, but not always. But is the point of the thread daily transactions for investment? You need to compare apples to apples.
6   NuttBoxer   ignore (2)   2018 May 16, 11:19am   ↑ like (0)   ↓ dislike (0)   quote        

MisterLefty says
Put your millions in 10 year UST's and fire up the bong.


Dangerous advise when even the Great and Powerful Bubble-Blower himself is saying bonds are due to bust.

https://www.cnbc.com/2017/08/01/alan-greenspan-the-bubble-is-in-bonds-not-stocks.html
7   Ceffer   ignore (1)   2018 May 16, 1:33pm   ↑ like (0)   ↓ dislike (0)   quote        

How much is that in Depends futures?
8   MisterLefty   ignore (0)   2018 May 16, 4:30pm   ↑ like (0)   ↓ dislike (0)   quote        

NuttBoxer says
angerous advise when even the Great and Powerful Bubble-Blower himself is saying bonds are due to bust.
Nay, nay. If you hold to maturity, you get back the amount you originally plunked down, plus you get paid 3%, maybe to be 4% soon, per year, for lending your moolah to Uncle Sam. It's only if you sell before maturity in a rising interest rate environment that you lose money. And if you sell in a falling interest rate environment (i.e., recession) you make money.
9   NuttBoxer   ignore (2)   2018 May 18, 11:55am   ↑ like (0)   ↓ dislike (0)   quote        

MisterLefty says
Nay, nay. If you hold to maturity, you get back the amount you originally plunked down, plus you get paid 3%, maybe to be 4% soon, per year, for lending your moolah to Uncle Sam.


I assume you are calculating for inflation, and the possibility of hyperinflation?
10   MisterLefty   ignore (0)   2018 May 18, 1:18pm   ↑ like (0)   ↓ dislike (0)   quote        

NuttBoxer says
I assume you are calculating for inflation, and the possibility of hyperinflation?
Not me, Mr. Market has inputed that in the rate. It's the risk-free rate, by gum.

Also, consider deflation, one argument for the Fed raising rates now, so they could lower them again.




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