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By Richard Milne in London and Michael Mackenzie in New York

Published: December 8 2010 20:23 | Last updated: December 8 2010 22:18

US Treasuries suffered their biggest two-day sell-off since the collapse of Lehman Brothers, following a torrid month that has seen borrowing costs for western governments soar.

Germany, Japan and the US have all seen their benchmark market interest rates rise by more than a quarter in the past month while the UK’s has risen by nearly a fifth.

“You could argue that we are at a new stage where the global cost of capital goes higher and higher,” said Steven Major, global head of fixed income research at HSBC.

The yield on 10-year US Treasuries hit a six-month high of 3.33 per cent on Wednesday, up 0.39 percentage points from Monday and 1 percentage point higher than its October low. Japanese five-year yields also rose the most in two years, while Germany’s benchmark borrowing costs hit 3 per cent. “People are getting out of the market and moving to the sidelines, feeling shellshocked at the speed of the rise in yields,” said David Ader, strategist at CRT Capital.

US 10-year yields have risen by about 0.76 percentage points since November 8, those of Germany by 0.62 percentage points, the UK by 0.53 percentage points and Japan by 0.29 percentage points as the prices of the bonds has fallen.

Yields are still relatively low compared with long-term trends but investors are starting to fret that they could continue to move sharply higher. “Yields at this level are clearly unsustainable,” said Paul Marson, chief investment officer at Lombard Odier, the Swiss private bank.

The market moves came after President Barack Obama agreed with Congressional Republicans to extend Bush-era tax cuts and combine them with a $120bn payroll tax holiday. But investors and traders were divided over whether that was sufficient to explain the recent global spike in yields.

The primary explanation is that growth expectations have increased because of better economic data and the “second stimulus” provided by the US government. But others argue it could be due to fears that the US Federal Reserve will not follow through on asset purchases or because of higher government deficits. “It is probably all three,” said Mr Major.

Germany has suffered from fears it could bear a high cost for bailing out troubled eurozone countries. Stock markets in Germany, the UK and Hong Kong all fell on Wednesday.

http://www.ft.com/cms/s/0/e550f996-0304-11e0-bb1e-00144feabdc0.html#axzz17aA7SnJt
 

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I know the article says 'most investors' agree it's all three factor's...

How much 'new' money has been injected into the economy since TARP? Does a Treasury sell-off precede inflation?

I'm wondering if this continues will inflation be around the corner?
 

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Discussion Starter #4
I know the article says 'most investors' agree it's all three factor's...

How much 'new' money has been injected into the economy since TARP? Does a Treasury sell-off precede inflation?

I'm wondering if this continues will inflation be around the corner?
If you want to see the realities of inflation, go get some groceries or gas. :lookinup:

It's here, and it's just getting warmed up.
 

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If you want to see the realities of inflation, go get some groceries or gas. :lookinup:

It's here, and it's just getting warmed up.
I think you are probably right, but, so far the much reviled Fed has been very effective at holding down inflation. I just don't have clue where this is all leading. I would feel bad about my ignorance, but I think I'm in pretty good company. :laughing:
 

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:rolling:

What? Your wife does the shopping don't she? :laughing:
Price spikes of a few weeks or even a few months do not constitute inflation. Time will tell if these recent increases are temporary or just the beginning of something much worse. In summer '08, who would have thought we would be paying $2.50 or less for gasoline for most of the next two years?
 

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If you want to see the realities of inflation, go get some groceries or gas. :lookinup:

It's here, and it's just getting warmed up.
I do the grocery shopping, the cooking, the cleaning, AND the transportaion, and I see it all over the place. The question I'm asking is this...could the sell-off be the tipping point?

Scarey part 1: We are at 0% interest rate now on borrowing.
Scarey part 2: Treasury yields are spiking causing the selloff.
Scarey part 3: The Ben Bernanke is about to unleash a buyback of $600 billion in treasuries.
Scarey part 4: China is pissed.
Scarey part 5: China and Russia are about to if not already rejecting the dollar for trade.
Scarey part 6: By Jan. 1st our defecit will be $16 trillion
Scarey part 7: Could this sell-off be the tipping point where the world says screw you America, we want our money and pull the plug on lending?
 

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I do the grocery shopping, the cooking, the cleaning, AND the transportaion, and I see it all over the place. The question I'm asking is this...could the sell-off be the tipping point?

Scarey part 1: We are at 0% interest rate now on borrowing.
Scarey part 2: Treasury yields are spiking causing the selloff.
Scarey part 3: The Ben Bernanke is about to unleash a buyback of $600 billion in treasuries.
Scarey part 4: China is pissed.
Scarey part 5: China and Russia are about to if not already rejecting the dollar for trade.
Scarey part 6: By Jan. 1st our defecit will be $16 trillion
Scarey part 7: Could this sell-off be the tipping point where the world says screw you America, we want our money and pull the plug on lending?
In our favor, we are still the largest consuming market in the world. These countries need our consumption and have a vested interest in NOT pushing us over the tipping point. I'm more worried about 10-20 years down the road when China and India consumers surpass us and lenders don't need us to stay healthy all that much. They might well pull the plug on us at that point. That tells me we better get our fiscal **** together before that time comes or we are screwed.
 

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If you don't think that, you must not have been sentient in the late 70's early 80's. :laughing:


From Wiki:
Economy: stagflation and the appointment of Volcker
Carter is credited by some with ending the double-digit inflation of the 1970s through his appointment of Paul Volcker as chairman of the Federal Reserve. Volcker's appointment was predicated on the notion that Volcker would raise interest rates to historic highs. As was obvious in advance to Carter and others, this policy would result the worst U.S. recession since the 1930s, disrupting -- often irretreivably wrecking -- the lives of millions of middle and lower-class Americans, while severely complicating Carter's ultimately failed hopes for re-election.
Yet by early in the Reagan Administration, this policy chosen initially by Carter, did tame U.S. inflation and lead to a long period of relative prosperity for U.S. financial markets. William Greider's 1987 work Secrets of the Temple, published shortly after a stock market crash, is notable for documenting these facts. Volcker and his subsequent proteges have subsequently dominated the Fed for at least several decades through various U.S. administrations.[citation needed]
During Carter's administration, the economy suffered double-digit inflation, coupled with very high interest rates,[22] oil shortages, high unemployment and slow economic growth. Productivity growth in the United States had declined to an average annual rate of 1%, compared to 3.2% of the 1960s. There was also a growing federal budget deficit, which increased to $66 billion[citation needed].

The 1970s are described as a period of stagflation, as well as higher interest rates. Price inflation (a rise in the general level of prices) creates uncertainty in budgeting and planning and makes labor strikes for pay raises more likely. Carter, like Richard Nixon, asked Congress to impose price controls on energy, medicine, and consumer prices, but Congress did not agree.[23]

In the wake of a cabinet shakeup in which Carter asked for the resignations of several cabinet members (see "Malaise speech" below), Carter appointed G. William Miller as Secretary of the Treasury. Miller had been serving as Chairman of the Federal Reserve Board. To replace Miller, and in order to calm down the market, Carter appointed Paul Volcker as Chairman of the Federal Reserve Board.[24] Volcker pursued a tight monetary policy to bring down inflation, which he considered his mandate. Volcker (and Carter) succeeded, but only by first going through an unpleasant phase during which the economy slowed and unemployment rose. Relief from inflation resulted during the first term of Ronald Reagan, who re-appointed Volcker.

Led by Volcker, the Federal Reserve raised the discount rate from 10% when Volcker assumed the chairmanship in August 1979 to 12% within two months.[25] The prime rate hit 21.5% in December 1980, the highest rate in U.S. history under any President.[26] Carter sought to justify these rates and the resulting unemployment growth in February 1980, by observing that inflation had reached a "crisis stage."[22] Investments in fixed income (both bonds held by Wall Street and pensions paid to retired people) were becoming less valuable. The high interest rates would lead to a sharp recession in the early 1980s, which coincided with Carter's re-election camp

Full Read at Wiki

Any of this sound familiar? Except of course the defecit of $66 Billion! Ohh Emm Gee!
 

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Discussion Starter #14
Price spikes of a few weeks or even a few months do not constitute inflation. Time will tell if these recent increases are temporary or just the beginning of something much worse. In summer '08, who would have thought we would be paying $2.50 or less for gasoline for most of the next two years?
Me and Ponch both said it would settle into the $2.50 range, when it was over $3. :huh:
 

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If sentient means he was still shitting in his diaper then you'd be correct. :laughing:
Looks like Carter was doing the same in that picture. :laughing:
 

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Well with this Government

I guess America is Bad investment

I think it's a bad investment

Look at their track record lol

 

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Good song, brother !
 
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