HELLO. TO ΣΗΜΑΝΤΙΚΟ ΝΕΟ ΤΗΣ ΗΜΕΡΑΣ!'
AND NOBODY SAYS NOTHING. ΚΑΙ ΓΙΑ ΝΑ ΔΕΙΤΕ ΟΤΙ ΚΑΙ ΣΤΑ ΜΕΓΑΛΑ ΣΑΛΟΝΙΑ ΣΤΑ GREAT OUTDOORS ΕΙΝΑΙ SO FULL OF SHIT ΟΠΩΣ ΣΤΗΝ ΕΛΛΑΔΑ.
TAKE A LOOK AT THIS
Barclays' Pond Says Yields to Rise at Record $12 Billion 10-Year TIPS Sale By Cordell Eddings - Jul 7, 2010
Barclays Plc’s Michael Pond, the top-rated analyst of Treasury Inflation Protected Securities, said the U.S. may struggle to sell a record-tying $12 billon of the securities tomorrow with the government likely to bolster the size of future auctions and inflation expectations low.
“We are concerned that the market will have difficulty absorbing this much supply given other headwinds and believe a significant concession is needed for the auction to go well,” Pond said in a note to clients dated July 2. “The level of real yields combined with the size presents a high hurdle for a good auction.”
The Treasury in May added more frequent auctions of TIPS to improve the liquidity of the securities, whose principal is adjusted to reflect changes in the consumer price index. The increased issuance comes as the U.S. begins to reduce the size of other Treasury auctions after increasing sales to all-time highs to finance record $1 trillion plus budget deficits.
“While TIPS offer long term structural value, we are seeing many headwinds from in the near-term, from risk aversion, to low real yields, supply and low core inflation readings and concern about a double dip in the economy” Pond said in an interview today. He was the top analyst the past two years in Institutional Investor magazine polls of more than 890 firms that manage about $10.2 trillion in assets.
The gap between yields on Treasuries and TIPS due in 10 years, a measure of the outlook for consumer prices called the breakeven rate, has fallen to 1.72 percentage points, from an almost two-year high on 2.49 percentage points on Jan. 11.
Barclays Capital is one of 18 primary dealers that are obligated to bid in Treasury auctions.
Real Yields
The $12 billion of 10-year TIPS will match the record amount sold in January 2004. The U.S. will sell $30 billion of the security during the second half of 2010, based on the size of tomorrow’s auction and the Treasury’s plans to reopen the issue twice, Pond wrote. That amount is up from $15 billion worth of sales during the second half of last year and the historical high of $21 billion during the first half of 2004, he wrote.
Real yields, which take into account inflation or deflation, have fallen to 1.218 percent on 10-year Treasuries, from 1.685 percent April 2, according to Bloomberg Data. Current real yield levels, only 30 basis points away from the 91 basis point yield experienced in March of 2008 during the deflation scare, leaves the security with “limited upside,” Pond wrote. “At current levels, this would be the lowest yield at a 10-year TIPS auction.”
Market Underperformance
TIPS have underperformed the nominal Treasury market this year, returning 3.8 percent, compared with a 6 percent gain for the nominal U.S. government debt securities, according to the Bank of America Merrill Lynch indexes.
This comes after investors piled into TIPS last year, sending the securities up 10 percent, versus a 3.7 percent loss for conventional Treasuries as investors sought inflation protection amid speculation the economy was recovering.
Historically low bond yields persist as Federal Reserve Chairman Ben S. Bernanke has cited tame inflation expectations for keeping the target interest rate for overnight loans between banks at a record low range of zero to 0.25 percent.
“At current levels we believe the headwinds outweigh the positives going into this auction,” Pond wrote. “We would expect the typical post-auction richening to happen though.”
ΚΑΙ TAKE A LOOK TODAY
The Treasury Department sold $12 billion in 10-year Treasury Inflation Protected Securities at a yield of 1.295%.
KAI OXI MONO AYTO
ΑΛΛΑ ΜΕ OVERCOME 2.88 TIMES
Solid demand for US inflation bonds By Michael Mackenzie in New York
Published: July 8 2010 19:55 | Last updated: July 8 2010 19:55
The largest sale of inflation-linked US Treasury debt since 2004 on Thursday attracted the strongest demand from investors in nearly four years.
More than half of the $12bn sale of 10-year Treasury inflation-protected securities was bought by institutional investors via Wall Street dealers. The so called ‘indirect bid’ of 51.9 per cent was the highest share of a Tips sale since October 2006 and was up from an average of 41 per cent for the previous six auctions.
The Treasury sold the debt at a yield of 1.295 per cent, down from a pre-auction level of 1.327 per cent, with a bid-to-cover ratio of 2.88 times, a solid level of demand. It was the second lowest yield for a 10-year Tips sale since $6bn of debt was issued at 1.25 per cent in April 2008.
“A really solid auction all around,” said Bill O’Donnell, strategist at RBS Securities. “The bid/cover was well above average for a new 10-year Tips issue, and especially impressive given the 20 per cent upsizing of the issue for this auction.”
The strong demand for the sale confounded some concern that investors would shy away from Tips as yields have fallen sharply in recent weeks amid expectations that the economy could slow down later this year and possibly flirt with deflation.
The difference between the yields of 10-year Tips and cash 10-year Treasury notes, known as the break-even inflation rate, has fallen sharply since mid-April amid concerns that deflation beckons.
The break-even or B/E reflects the expected average rate of inflation over the next ten years. Since April, the 10-year B/E has dropped from 2.50 per cent to around 1.70 per cent, the lowest level since last October.
“On a long-term basis, we find break-evens structurally cheap,” said Mike Pond, head of inflation strategy at Barclays Capital.
Analysts at Citi said the strong sale might not translate into a follow through rally, where yields have fallen an average of 17 basis points in the five trading days after the last six 10-year auctions.
“The lower yield level of the current auction may temper this,” said the Bank, but they also noted that yields rose some 15 bps ahead of Thursday’s sale.
Earlier on Thursday, the US Treasury announced new auction sales due next week, led by $35bn three-year notes, $21bn 10-year notes and $13bn of 30-year bonds.
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