Sunday, September 07, 2008

Where do US Treasuries go Now?


We have the largest corporate failure of all time occurring over the weekend and I don't see that big of a reaction from people as I would expect.

If the current trends keep going, stocks will go lower, mortgage rates will go lower, bond yields will go lower, housing prices will go lower, the Euro will go lower, Crude oil will go lower, and investor confidence will go lower.

I thought that interest rates were likely to be raised next year and that treasury yields were likely to bounce at these levels and never return, but, with the government taking over FNM and FRE, I'm not so sure.

The FED could lower interest rates more and mortgage rates could go lower. With the FED taking over FNM and FRE, I'm wondering how big of an affect this will have on US treasuries. Will there be a lack of buyers? What happens if a large bank like Washington Mutual collapses and the FDIC needs to go to the US treasuries for bailout money? We already saw the FDIC increasing reserves a couple weeks ago. The FDIC failed bank list is growing, with expectations of over 100 banks to fail before it is all said and done. I'm not sure where treasuries are headed right now. Even though we are at historically low levels, we could still go lower. The best thing I can do is to stay on the side of the trend and the trend is down.

1 comments:

Anonymous said...

Don Miller blog
http://donmillerjournal.blogspot.com/2008/09/friday-notes-market-pace-from-heaven.html

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