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Wednesday, November 26, 2008

U.S. Treasury debt market "breaking down"

"The U.S. Treasury market, the foundation of government bond and corporate bond markets worldwide, is suffering a crisis of confidence at the worst possible moment," writes Institutional Investors's Euromoney. "Investors in Treasuries are the lenders enabling the US government bail-out of the country’s broken financial institutions. That leaves them financing purchases of equity of volatile and highly questionable worth and backing a ragbag of distressed assets.

"For now, Treasury yields are at record lows across the term structure as investors with cash to invest conclude that they can trust no one else with their money. But investors must wonder at what point the expanded supply of government debt and its use will make the borrower inherently less creditworthy.

"There is an even more pressing concern...: the settlement system has broken down. Following the collapse of Lehman Brothers in September, fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion. Broker/dealers have stopped delivering bonds. Holders of US treasuries are now scared to lend into the repo market in case their bonds are not returned, and potential buyers sit on the sidelines fearful of handing over their money to a counterparty that at best might not deliver a bond on time, and at worst might go under."

http://www.euromoney.com/Article/2054070/The-US-treasury-market-reaches-breaking-point.html?LS=EMS224393
Posted by Joseph N. DiStefano @ 7:52 AM  Permalink | 1 comment
Comments   
  • 0 like this / 0 don't   •   Posted 1:23 AM, 04/23/2009
    Very heartrending! In addition to the programs offered by the US Treasury, they have also the so called iBonds.iBonds are not an investor software application for Apple products. iBonds are a new series of U.S. Treasury bonds that you can order over the internet. These bonds are a guaranteed investment, as the interest rate for them is adjusted so that it always turns a profit. You won't need a cash advance to float you if the market tanks. However, it doesn't mean that you'll be raking in the cash – there is a penalty for any withdrawal within five years of purchase, and they stop accruing after thirty. They aren't a good buffer for debt relief, iBonds are best used as a long term investment.
    — DuncanQ


1 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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