Comments on: Not a good sign: the Treasury once again can borrow for free http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/ Sat, 21 Nov 2009 16:40:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Drowning Market Grabs for a Lifeline | Money and Markets Blogs http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-121940 Drowning Market Grabs for a Lifeline | Money and Markets Blogs Fri, 09 Jan 2009 16:48:42 +0000 http://blogs.cfr.org/setser/?p=4090#comment-121940 [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...] [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...]

]]> By: Drowning Market Grabs for a Lifeline http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-121746 Drowning Market Grabs for a Lifeline Wed, 07 Jan 2009 21:53:06 +0000 http://blogs.cfr.org/setser/?p=4090#comment-121746 [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...] [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...]

]]> By: Drowning Market Grabs for a Lifeline « Red Hot Energy and Gold http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-120874 Drowning Market Grabs for a Lifeline « Red Hot Energy and Gold Tue, 23 Dec 2008 04:09:11 +0000 http://blogs.cfr.org/setser/?p=4090#comment-120874 [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...] [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...]

]]> By: Drowning Market Grabs for a Lifeline « red-hot-energy-and-gold http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-119955 Drowning Market Grabs for a Lifeline « red-hot-energy-and-gold Thu, 11 Dec 2008 15:03:13 +0000 http://blogs.cfr.org/setser/?p=4090#comment-119955 [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...] [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...]

]]> By: Drowning Market Grabs for a Lifeline « Red-Hot Energy and Gold http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-119789 Drowning Market Grabs for a Lifeline « Red-Hot Energy and Gold Tue, 09 Dec 2008 15:58:15 +0000 http://blogs.cfr.org/setser/?p=4090#comment-119789 [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...] [...] sought-after collateral in times of crisis. And here’s the yield on T-Bills … The commentary on this chart: “Where the credit markets are trading, it’s all but implying a 1929 scenario,” said Joe [...]

]]> By: Must Be Ture http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-118723 Must Be Ture Thu, 27 Nov 2008 08:45:30 +0000 http://blogs.cfr.org/setser/?p=4090#comment-118723 I noticed that Fails by U.S. Government Securities Dealers - U.S. Treasury Securities, Fails to Receive (in millions): 09/17/2008 $ 292,508 09/24/2008 $ 1,846,492 10/01/2008 $ 2,497,627 10/08/2008 $ 2,481,355 10/15/2008 $ 2,697,858 10/22/2008 $ 2,627,691 10/29/2008 $ 1,634,134 11/05/2008 $ 1,344,336 11/12/2008 $ 653,424 From: http://www.newyorkfed.org/markets/gsds/search.cfm Why are those numbers so high? I noticed that Fails by U.S. Government Securities Dealers – U.S. Treasury Securities, Fails to Receive (in millions):

09/17/2008 $ 292,508
09/24/2008 $ 1,846,492
10/01/2008 $ 2,497,627
10/08/2008 $ 2,481,355
10/15/2008 $ 2,697,858
10/22/2008 $ 2,627,691
10/29/2008 $ 1,634,134
11/05/2008 $ 1,344,336
11/12/2008 $ 653,424

From:
http://www.newyorkfed.org/markets/gsds/search.cfm

Why are those numbers so high?

]]> By: Awake http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-118709 Awake Thu, 27 Nov 2008 04:34:20 +0000 http://blogs.cfr.org/setser/?p=4090#comment-118709 Chidam: "As I’m saying I could be really, seriously wrong in reasoning that the fixed interest rate leg of the swap is about the expected interest rates … any comments on that?" No, you are correct. In pricing a fixed vs. float, you price the float side first based on the projected (probably LIBOR) spot rate curve. Use the present value of this obligation to determine what "fair" (i.e, net zero) interest rate should be set for the fixed. Brad: I wanted to know your thoughts on what it means for the Treasury to be able to borrow "for free" in relation to its prior debtor obligations. As an entity takes on more and more debt, we would expect the required yield on such debt to increase; this prevents the debtor from "borrowing his way out of debt" by paying off debt with debt. Currently, we have the opposite situation. My question is: why doesn't the treasury take advantage of its current near-free borrowing and insatiable demand to arbitrage its debt burden? The only answer I can think of is they plan on issuing incredibly huge amounts of debt soon, and don't want to saturate the market. Would like to know your thoughts. Chidam:
“As I’m saying I could be really, seriously wrong in reasoning that the fixed interest rate leg of the swap is about the expected interest rates … any comments on that?”

No, you are correct. In pricing a fixed vs. float, you price the float side first based on the projected (probably LIBOR) spot rate curve. Use the present value of this obligation to determine what “fair” (i.e, net zero) interest rate should be set for the fixed.

Brad: I wanted to know your thoughts on what it means for the Treasury to be able to borrow “for free” in relation to its prior debtor obligations. As an entity takes on more and more debt, we would expect the required yield on such debt to increase; this prevents the debtor from “borrowing his way out of debt” by paying off debt with debt.

Currently, we have the opposite situation. My question is: why doesn’t the treasury take advantage of its current near-free borrowing and insatiable demand to arbitrage its debt burden?

The only answer I can think of is they plan on issuing incredibly huge amounts of debt soon, and don’t want to saturate the market. Would like to know your thoughts.

]]> By: Rainbolt http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-118700 Rainbolt Thu, 27 Nov 2008 00:50:45 +0000 http://blogs.cfr.org/setser/?p=4090#comment-118700 This interest rate has everything to do with creating a caste of debt slaves: American Express can charge me 42% interest on my credit card, from just having an existing balance. And if I choose to save a few shillings, and want to save a little in a safe place, I get zero! Absolutely ZERO! Why can't those of us get a piece of the action? It's because the government is taking all the profits, along with the bankers. I protest!!!! This should be illegal!!!! I protest!!!!! This interest rate has everything to do with creating a caste of debt slaves:

American Express can charge me 42% interest on my credit card, from just having an existing balance.

And if I choose to save a few shillings, and want to save a little in a safe place, I get zero! Absolutely ZERO!

Why can’t those of us get a piece of the action? It’s because the government is taking all the profits, along with the bankers.

I protest!!!! This should be illegal!!!! I protest!!!!!

]]> By: Huckpioloucky http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-118688 Huckpioloucky Wed, 26 Nov 2008 16:23:20 +0000 http://blogs.cfr.org/setser/?p=4090#comment-118688 hey! I made on photoshop animated myspace banners. take a look at them: http://tinyurl.com/644y75 Thank you for your site :) xxoxo hey!
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]]> By: Judy Yeo http://blogs.cfr.org/setser/2008/11/20/not-a-good-sign-the-treasury-once-again-can-borrow-for-free/#comment-118485 Judy Yeo Mon, 24 Nov 2008 00:28:54 +0000 http://blogs.cfr.org/setser/?p=4090#comment-118485 Twofish paranoia towards models or just common sense. no model, no matter how many variables it uses or measures, can duplicate reality approximate , maybe, under the best of conditions but however great a model, it is still constrained by parameters. hmm, as for physicists, not going to comment on that, have offended more than one can reasonably be expected to offend, but let's just say that the innocent nerd is hardly the common image these days , some of them haven't even heard of Hawkings, much less get hopelessly hooked on what were typical physicist hangups in the past; wonder how many would crack a smile at "restaurant at the end of the world" Twofish

paranoia towards models or just common sense. no model, no matter how many variables it uses or measures, can duplicate reality approximate , maybe, under the best of conditions but however great a model, it is still constrained by parameters.

hmm, as for physicists, not going to comment on that, have offended more than one can reasonably be expected to offend, but let’s just say that the innocent nerd is hardly the common image these days , some of them haven’t even heard of Hawkings, much less get hopelessly hooked on what were typical physicist hangups in the past; wonder how many would crack a smile at “restaurant at the end of the world”

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