treasury

Henry M. Paulson left

March Treasury Bonds surged to the upside and erased all of Wednesday’s losses following the weak U.S. economic reports. Traders reacted to the possibility of interest rates staying lower for a long-time. Today’s Treasury bond action also went off without a hitch, generating more interest in the long side of the market. The charts indicate the next upside objective is 117’14.

Stock indices managed to eke out a small gain after the Fed left interest rates alone but offered more details as to how it plans to exit its stimulus programs. Although the Fed said the employment situation was improving equity traders failed to take notice and instead focused on the thought of higher interest rates.

December Treasury Bonds and Treasury Notes surged in the afternoon following better than expected results from today’s $42 billion 5-Year Treasury Note auction. The decline in U.S. 3rd Quarter GDP provided support earlier in the trading session along with weaker equity prices.

December Treasury Bonds and Notes were able to post higher closes after robust demand at today’s treasury auction helped drive down yields. This is a sign that investors are looking for safety.

After today, money market mutual fund accounts no longer will have the backing of the U.S. Treasury. Uncle Sam is betting that fund investors won’t care -- or won’t notice.

Today’s Treasury auction saw great demand which helped drive up the price of September Treasury Bonds. Investors were encouraged to buy the 3-year Notes at the auction because of the attractive yield and the weakness in the equity markets. Overseas demand was particularly stronger compared to the last three months.

It troubles me greatly to know that while the 30 year Treasury bond is yielding a mere 4.6%, we are not locking in that low rate for our newly issued debt. Any thinking American knows it would be best to take advantage of that ridiculously low yield and finance the Treasury's borrowing at the long end of the curve.

In 2006, 2007 and 2008, rising inflation expectations during the first half of the year prompted a sell-off in US Treasury Bonds. And in each case inflation expectations peaked in June, leading to an intermediate-term bottom in the T-Bond market at that time. Interestingly, but not surprisingly from our perspective, this year has followed a similar pattern to date.

It is becoming painfully obvious that the Fed, Treasury, and Administration's disastrous recovery plan hinges on the devaluation of the U.S. dollar. Their specious strategy stems from the belief that a falling currency can re-ignite exports and spark a recovery in manufacturing while putting a floor in U.S. asset prices. But just as the President's initials indicate, the plan stinks of B.O.

Brand expert John Tantillo praises the Treasury Department's recent bank stress tests (with a few caveats) and criticizes KFC and Oprah for the recent coupon fiasco.

The Stress Test results will be released to the banks today only. They will hear whether they pass/fail and how it was all calculated. Wall Street and the commoner will only hear how the tests were done, what rules were used to test these banks today. This is supposed to come out at 2pm ET. Some of the big worries Wall Street has is whether or not any banks will fail.

In part two of What's Driving Gold and Gold Stocks, editor Justice Litle looks at the reasons why 2009 could still be a great year for the yellow metal (and the companies that mine it).

So, the markets are celebrating today's changes to FASB mark-to-market accounting rules, and rightfully so. I've written enough on this in the past that I'll spare you the litany here.

I do know, however, that if I'm Citigroup (NYSE: C), I feel cheated. Actually, they were flat out robbed by the government.

So there is big news out of Treasury, many people are crediting the big move up in stocks to the news and maybe that is right but from what I read there is still the question of how these assets will be priced.