InvestorMind

The past week has seen some rather sharp selloffs in the U.S. treasury market. Is "Operation Twist" failing? Will we soon see a resumption of overt quantitative easing? Diligent Turdites will recall that we've been discussing this possibility for months. For me, the key to correctly anticipating the resumption of  overt  QE is found in watching movements of long-term interest rates. As often stated here,  The Federal Reserve cannot allow interest rates to rise . Keeping rates low and funding the federal budget deficit are the two, primary goals of quantitative easing. Therefore, dropping bond prices (higher interest rates) signal that more QE (Fed buying on bonds) is necessary. Well, what to make of these charts? We know from reviewing the long-term charts of the 10-year and the Long Bond that previous drops in price preceded the announcement of QE1 and QE2. We're almost there again. The 10-year is now perched precariously above the all-important 127.50 level and the...

WASHINGTON (MarketWatch) — Federal Reserve officials are considering a new type of quantitative easing that will attempt to boost the economy without accelerating inflation, according to a report published Wednesday. Analysts said the new approach would allow the Fed to move despite high oil prices. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates, according to a story in The Wall Street Journal. This “sterilized” quantitative easing, would use reverse-repurchase agreements to keep the money from flowing to bank reserves. Markets reacted to the report, with stocks SPX +0.69% advancing to their strongest level of the day. Commodities also rose. Read more about stocks in Market Snapshot. Economists said that Fed Chairman Ben Bernanke seemed to back away from more quantitative easing during two days of testimony before Congress last week. Finan...

(Reuters) - Italian police said on Friday they had seized about $6 trillion of fake U.S. Treasury bonds in Switzerland, and issued arrest warrants for eight people accused of international fraud and other financial crimes. The operation, co-ordinated by prosecutors from the southern Italian city of Potenza, was carried out by Italian and Swiss authorities after a year-long investigation, an Italian police source said. The fake securities, more than a third of U.S. national debt, were seized in January from a Swiss trust company where they were held in three large trunks. The eight alleged fraudsters are accused of counterfeiting bonds, credit card forgery, and usury in the Italian regions of Lombardy, Piedmont, Lazio and Basilicata, police said. The Swiss Federal Prosecutor's office said Zurich state prosecutors had worked on the investigation at the request of the Italian prosecutor. The Swiss handed over their findings in July of last year. In 2009, Italian financial po...

While there is precious little in terms of detail coming out of the latest and literally greatest "fake" bond story in history, the BBC has been kind enough to release the pictures of the boxes that the supposedly fake bonds were contained in. While we reserve judgment on the authenticity of the bonds, what we wonder is whether the boxes were also fake. Because while we can understand why someone would counterfeit the Treasury paper itself, what we don't get is why someone would go the extra effort to also create a "fake" compartment in which to store it. In this case a compartment that is property of the " CHICAGO FEDERAL RESERVE SYSTEM . " Perhaps Fed uberdove and Chicago Fed President Charles Evans will be kind enough to explain why Versailles Treaty Chicago Fed crates are floating around in Europe (and filled with $6 trillion in supposedly fake bearer bonds)? What is also interesting is that a simple google search for Mother Box Treat...

News out of Brussels last night was that a package is being put together that would haircut Greek bonds by 70%, thus only paying back 30 cents on the dollar to anyone holding Greek paper. This will set a precedent that will eventually be played out all over Europe. Full AP story HERE.   This is extremely bad, and will spell the end of the big U.S. banks and the financial system in total. But EVERYONE needs to understand credit default swaps (CDS) first. CDS are insurance policies that investors have traded – very similar to OPTIONS for my old clients and cattle people out there. Buying a CDS is essentially like buying a put. The buyer pays a premium, or fee, to the writer, or seller of the CDS that says that the seller will guarantee and make whole the buyer’s position in a specific bond IF the entity behind the bond (such as Greece) defaults. In exchange for paying the premium and being made whole after a default, the buyer of the CDS surrenders the bond posit...

Just like in yesterday's weakish 10 Year auction, the thunder from Tuesday's strong 3 Year has all but gone. In today's issuance of $13 billion in 30 year reopening, the results were anything but strong, with the bond pricing at 2.985%, a a 3 bps tail compared to the 2.955% When Issued. Furthermore, the BTC was a big drop compared to last auction's record 2.98, coming at 2.60, compared to 2.68 in the last 12 auctions. And with Indirects taking down just 31.9%, and Directs sliding to a one year low of 7.2%, it means that it was the Fed, via the Primary Dealer repo mechanism that once again took down a whopping 60.9% of the entire auction. Needless to say, the bond market response was not pleasant, but was to be expected as the Fed continues to artificially massage the curve in any and every way possible. Most hilarious, however, was the tweet sent out by Bill Gross in the minutes after the auction which we present below: it speaks for itself. Read more

With year end fund flows making absolutely no sense for the most part, thank you global central planning, as the euro plunges and the market refuses to follow, with risk assets rising on speculation the ECB (and/or Fed) are about to restart printing yet gold collapsing (on one or two hedge funds liquidating, yet econ PhDs already rewriting their theses on why the "gold bubble has popped"), and finally with Treasurys soaring to near all time highs (10 Year under 1.9% yesterday even as stocks surged on data from the National Advertisers of Realtors, aka NAR, of all fraudulent and corrupt entities), here is the latest observation to make the confusion complete. As the Fed's critical H.4.1 weekly update shows (which is leaps and bounds more accurate than the Treasury's TIC international fund flow data), in the week ended December 28, foreign investors sold the second highest amount of  US bonds in history, or $23 billion, bringing total UST custodial holdings ...

By Matt Phillips Just for the record, gold is limping into the end of 2011, while Uncle Sam’s I.O.U.’s are finishing strong . Year-to-date, the total return on long-term Treasurys — counting price increases and interest payments — was roughly 30% through Wednesday. After the clobbering gold took yesterda y, gold is up only 11.6% on the year. It’s down another 1% Thursday. But, don’t worry barbarous relic lovers, you could have done much worse. The total return on the S&P 500 — that’s price and dividend payments — is a negative 1.7% through the end of yesterday. Here’s a look at the chart. FactSet Research Of course, we love to prod the goldbugs — if only to make them stop scanning the horizon for the black helicopters, put down their shotguns, and hand-crank their generators to fire up their laptops and post angry comments from their tin shacks somewhere out in the high desert. But gold’s run higher over the last few years has been nothing to sneeze at. Over the...

Is somebody or some country printing fake bonds or are they actually trying to dump US Bonds?

This is interesting. PIMCO basically said it has no confidence in the US bond market because of the huge deficit which could lead to high inflation and weaker dollar. He even shorted Treasuries in March. The high price of oil, gold and silver pretty much confirms that the US Dollar is losing a lot of it value.