The US Department of the Treasury has announced:
The balance of our financing requirements will be met with weekly bills; monthly 52-week bills; monthly 2-year, 3-year, 5-year, and 7-year notes; the September and October 10-year note and 30-year bond reopenings; and the October 5-year and 10-year TIPS reopenings.
…
Currently we believe our existing suite of nominal securities is sufficient to address our borrowing needs; however, market participants should expect auction sizes to continue to rise in a gradual manner over the medium term. In addition, to increase our flexibility, issuance of Treasury inflation-indexed securities will also increase gradually.Nevertheless, Treasury will continue to monitor projected financing needs and make adjustments to the auction calendar, if necessary. These include, but are not limited to, the reintroduction or establishment of other benchmark securities or other changes to the auction calendar for existing nominal and inflation-indexed securities.
Treasury is committed to issuing TIPS in a regular and predictable manner across the yield curve. These securities are an important part of our overall debt management strategy, and market participants can expect issuance to gradually increase in FY 2010.
Additionally, to potentially improve liquidity in the TIPS program and better capture the premium associated with inflation protection, Treasury will consider replacing 20-year TIPS with 30-year TIPS.
Any potential changes to the TIPS program will be announced at the November 2009 refunding.
Across the Curve comments that in typical market fashion, this announcement resulted in an increase to TIPS prices:
TIPS bonds are besting their nominal rivals. In announcing that it would tinker with TIPS issuance the Treasury averred that increased offerings would not occur until 2010.
The widening of breakevens represents the howls of the shorts who had planned for an increase in issuance at this instant. Thirty year breakevens have moved to 227 basis points from 220 late yesterday.
The Wall Street Journal reports that increases to TIPS sizes is due to pressure from China:
China, the largest holder of U.S. government debt, is among investors that have indicated to the Treasury that they want to buy more of the securities, which offer protection against rising inflation, the people said.
Officials from the U.S. and China discussed TIPS issuance at high-level talks in Washington last week.
China is getting assertive! They roiled the market a while ago when they decreased their holdings of Agencies and now they’re demanding inflation protection. Well, he who pays the piper … I have always thought that America’s fiscal profligacy will not reverse until it sinks in on Joe Sixpack’s political thoughts that the rate he pays on his mortgage is set in Beijing.
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In my Tract The Age of Turbulence: Plea for a New Economic Order, I explain the nature and causes of economic depressions.
In fluid dynamics, turbulence or turbulent flow is a fluid regime characterized by chaotic, stochastic property changes. This includes low momentum diffusion, high momentum convection, and rapid variation of pressure and velocity in space and time.
A Turbulence is a Chaotic, Discontinuous State of a Liquid. It Owns Most of the Proprieties of Keynes’ Liquidity Trap.
It proves that after the inflation of the Mother of all Asset Price Bubbles the ominous fate of this economy is Keynes’ Liquidity Trap.
Its consequences are a new, bigger Crash causing, this time, a Real Great Depression II.
That bipolarity of the Market is the problem: any irrationally exuberant person, as any psychiatrist would tell, is unable to understand that he is irrational and that he will necessarily fall in a deep depression. He just doesn’t want to hear the warning no matter how many times he had the experience.
What do we do Before The Crash?
My Strategy: Preparing for the Crash, The Age of Turbulence. answers that question.
Using the yield curve as a predictor that strategy covers Treasuries, Corporate Bonds, Minerals (Oil, Precious Metals and Base Metals.) and Stocks.
Its aim is to profit from both the Asset Price Bubble and Irrational Exuberance and The Crash and Economic Depression that will necessarily ensue.
It tries, and for the time being very profitably, to accomplish Alan Greenspan Mission Impossible:
“That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.
Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.
Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated – if people see them coming, then the markets arbitrage them away.”
….
The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.
In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to “get up and dance”, as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share.
Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong.”
Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].
That Strategy Will not Any More be Available to the General Public as of September 1st, 2009. However the Members of My Networks Will Still Have Access to It & Will be Regularly Updated. Join My Networks Now!
The Yield Curve – Plea for a New Economic Order.
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But what do we do After The Crash?
I propose a plausible alternative solution to the Depression: I designed a System that will allow us, when The Crash will come, to get out of Credit Based Free Market Economy, Capitalism, and transfer to my Adjusted Credit Free, Free Market Economy and Abolish the FED:
To participate in our New Economic Order you need to Enter Your €5 in the Public Cra$h R€gi$t€r Before The Crash – It is Fr€€!..
I.10.82
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.
But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
I.10.83
A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. It connects individuals who might never otherwise be known to one another, and gives every man of the trade a direction where to find every other man of it.
I.10.84
A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows and orphans, by giving them a common interest to manage, renders such assemblies necessary.”
Adam Smith
June 5th, 1723 – July 17tn, 1790
An Inquiry Into the Nature and Causes of the Wealth of Nations.
Inequalities Occasioned by the Policy of Europe.
March 9th, 1776
The Tract Will be Published on September 17tn, 2009. It Will be Withdrawn from the Internet on September 1st, 2009. Buy The Tract Now!
You will certainly enjoy my popular articles:
Ron Paul vs. Bernanke.
Ben “Systemic” Bernanke.
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