Inflation free for 30 years?
The 30 yr bond auction, the part of the curve one can define as the leap of faith maturity in my opinion, was mixed. The yield was a touch above the when issued but the bid to cover of 2.77 was above the 1 yr average of 2.63. The combined direct and indirect take of the auction was the highest since Feb ’06, the first auction when the 30 yr was reintroduced. The 30 yr maturity is mostly purchased by insurance companies and pension funds in order to best match up with their long term liabilities and is the main reason why its spread to the 10 yr has gone to a record high this week as market participants outside of the above two go for smaller maturities. Also, regardless of where inflation is today or tomorrow, betting that we’ll see inflation of substance at some point in the next 30 years in light of current Fed policy seems like a good one and another reason why its lagged.
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August 12th, 2010 at 4:56 pm
God man! Do you know how bad things can get? Have you ever been to Masada? Not to tickle your fancy but aren’t we in the economic equivalent? Why must green shoots be the emparive. Some times servival is good. The Germans learned this long ago….thanks to the Russians as far as “recent” history projects. What? Are americans immune?
August 12th, 2010 at 6:36 pm
I remember Peter Schiff spouting on the air one time that the US yields are low because they are just rolling it over from one short term security to another and they wouldn’t dare reach out to longer term issues and if they tried the market would punish them. Well, they just tried it and did it and yields are still low.