Ali’s blog

Mostly quant stuff with occasional digressions

30-Year Treasuries Fall Most Since ’04 as Demand Fades at Sale

Posted by alifinmath on February 8, 2008

From Bloomberg:


Feb. 7 (Bloomberg) — Treasuries tumbled after the government’s $9 billion auction of 30-year bonds at the lowest yields ever chased away investors.

The longest-maturity U.S. debt fell the most since 2004 as bondholders concluded that yields were too low given the Federal Reserve’s determination to cut interest rates and keep the economy out of a recession. Before the government’s sale, investors expected a 4.41 percent yield, based on pre-auction trading. The bonds were sold at 4.449 percent.

Traders pushed 10-year note yields to 1.7 percentage points above two-year rates. The difference is the biggest since September 2004, signaling reduced demand for longer-maturity debt, which is most sensitive to expectations that inflation will accelerate as rate cuts spur growth.


And another story here (related to the one above in a subtle manner):


NEW YORK – In the latest example that the U.S. dollar just ain’t what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.

The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates.


Reminds me in some way of the old days in Weimar Germany when a woman who sat down and ordered a coffee for 5000 marks found the price had gone upto 8000 marks when she had to pay the bill. Restaurant prices used to change by the hour (so restaurant managers stopped putting the price in the menu or using a pencil for the purpose). Workers used to bring their wages home in wheelbarrows and their wives used to rush out to buy groceries before prices rose even further… those were the days.


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