Since, the Treasury knows that they need to find a way to sell more debt, they have come up with the idea of floating rate notes. How about we quit spending a trillion dollars a year more than we bring in?
US Treasury Considers New Debt Instrument
The US Treasury and Wall Street dealers are set to discuss whether to introduce a new debt security to help finance the country’s mounting budget deficit in the coming years.
Topping the agenda of a meeting on Friday between Treasury officials and dealers, who underwrite US government debt sales, is the possible introduction of floating-rate notes.
In contrast to normal fixed-rate Treasuries, which pay the same coupon throughout their lifespan, the payment to investors from floating-rate notes would go up or down as the Federal Reserve changed short-term interest rates. That could make them attractive to investors who think that Treasury yields have hit a floor and are set to rise in the coming years.
“We think the case for diversifying the Treasury’s funding sources by introducing [floating rate notes] is very strong in light of the prospect of persistently large budget deficits in the years ahead,” said Lou Crandall, economist at Wrightson Icap. “They would give the Treasury an additional tool for meeting unexpected increases in borrowing needs that would neither place upward pressure on long-term rates nor add to the government’s near-term rollover needs.”
According to the agenda for the meetings, the Treasury will ask dealers about the “optimal structure” for floating rate securities, how they “would affect Treasury’s overall cost of borrowing”, and whether there would be “robust market demand” for such debt.
“There would be demand for floating rate Treasuries,” said Rick Klingman, managing director at BNP Paribas. “From my perspective I would rather own floating-rate than fixed-rate debt over the coming years.”
With the prevailing view in the bond market that Treasury yields have set their lows and will gradually rise in the coming years, issuance of floating-rate debt could prove more costly for US taxpayers.
As it stands, the US Treasury is locking in funding over the next 30 years at record low yields. This month the sale of $13bn 30-year bonds came at a yield of 3.12 per cent – well below the 4.75 per cent level the issue was sold at in February.
Regular sales of floating rate notes would help meet the expected demand for safe securities to be placed on bank’s balance sheets under proposed tighter capital standards under Basel III and as collateral in derivatives trading.
“The need for safe, short-term dollar-denominated assets is likely to exceed the supply for as far as the eye can see,” says Mr Crandall.
One drawback for the Treasury is that it is intent on extending the average maturity of its debt from around its current age of 62 months. Should the Treasury sell three-year $20bn in floating-rate notes per month, the monthly rollover burden would reach that figure once the issues began maturing.
While the Treasury could sell longer-dated FRNs of up to 10 years, extending the maturity beyond three to five years may not attract investors who would be the target market for the product, says Mr Crandall.
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I don't know what it is about fights in fast food restaurants, but it seems to be occurring at a rapid pace.
McDonald's Cashier Beats 2 Customers
An argument between a cashier and two irate customers at a Manhattan McDonald’s turned violent, leaving both customers injured and all three facing charges.
The entire incident, which was captured on video, happened Thursday morning at a McDonald’s on West Fourth Street in Greenwich Village, CBS 2’s Chris Wragge reports.
It appeared to have started when two female customers argued and yelled obscenities at the cashier when he questioned a $50 bill they gave him.
One of the female customers then slapped the cashier. A woman is then seen jumping over the counter while the other woman goes behind the register.
That’s when the cashier can be seen on the video disappearing into the back of the fast-food restaurant. He comes back with a metal rod and begins hitting the women.
Other customers watched in horror as McDonald’s workers tried unsuccessfully to stop the violence.
One female customer had a fractured skull that required surgery and a broken arm. The other has a deep laceration.
Rayon McIntosh, 31, was arrested and charged with two counts of felony assault and criminal possession of a weapon.
Topping the agenda of a meeting on Friday between Treasury officials and dealers, who underwrite US government debt sales, is the possible introduction of floating-rate notes.
In contrast to normal fixed-rate Treasuries, which pay the same coupon throughout their lifespan, the payment to investors from floating-rate notes would go up or down as the Federal Reserve changed short-term interest rates. That could make them attractive to investors who think that Treasury yields have hit a floor and are set to rise in the coming years.
“We think the case for diversifying the Treasury’s funding sources by introducing [floating rate notes] is very strong in light of the prospect of persistently large budget deficits in the years ahead,” said Lou Crandall, economist at Wrightson Icap. “They would give the Treasury an additional tool for meeting unexpected increases in borrowing needs that would neither place upward pressure on long-term rates nor add to the government’s near-term rollover needs.”
News, data and opinions on central banks around the world
But the discussions may not herald the imminent introduction of such securities. The Treasury has asked similar questions in the past and is conservative about changes to debt issuance. The last new Treasury issuance product it introduced was inflation-protected securities in the late 1990s.According to the agenda for the meetings, the Treasury will ask dealers about the “optimal structure” for floating rate securities, how they “would affect Treasury’s overall cost of borrowing”, and whether there would be “robust market demand” for such debt.
“There would be demand for floating rate Treasuries,” said Rick Klingman, managing director at BNP Paribas. “From my perspective I would rather own floating-rate than fixed-rate debt over the coming years.”
With the prevailing view in the bond market that Treasury yields have set their lows and will gradually rise in the coming years, issuance of floating-rate debt could prove more costly for US taxpayers.
As it stands, the US Treasury is locking in funding over the next 30 years at record low yields. This month the sale of $13bn 30-year bonds came at a yield of 3.12 per cent – well below the 4.75 per cent level the issue was sold at in February.
Regular sales of floating rate notes would help meet the expected demand for safe securities to be placed on bank’s balance sheets under proposed tighter capital standards under Basel III and as collateral in derivatives trading.
“The need for safe, short-term dollar-denominated assets is likely to exceed the supply for as far as the eye can see,” says Mr Crandall.
One drawback for the Treasury is that it is intent on extending the average maturity of its debt from around its current age of 62 months. Should the Treasury sell three-year $20bn in floating-rate notes per month, the monthly rollover burden would reach that figure once the issues began maturing.
While the Treasury could sell longer-dated FRNs of up to 10 years, extending the maturity beyond three to five years may not attract investors who would be the target market for the product, says Mr Crandall.
********************************************************************************
I don't know what it is about fights in fast food restaurants, but it seems to be occurring at a rapid pace.
McDonald's Cashier Beats 2 Customers
An argument between a cashier and two irate customers at a Manhattan McDonald’s turned violent, leaving both customers injured and all three facing charges.
The entire incident, which was captured on video, happened Thursday morning at a McDonald’s on West Fourth Street in Greenwich Village, CBS 2’s Chris Wragge reports.
It appeared to have started when two female customers argued and yelled obscenities at the cashier when he questioned a $50 bill they gave him.
One of the female customers then slapped the cashier. A woman is then seen jumping over the counter while the other woman goes behind the register.
That’s when the cashier can be seen on the video disappearing into the back of the fast-food restaurant. He comes back with a metal rod and begins hitting the women.
Other customers watched in horror as McDonald’s workers tried unsuccessfully to stop the violence.
One female customer had a fractured skull that required surgery and a broken arm. The other has a deep laceration.
Rayon McIntosh, 31, was arrested and charged with two counts of felony assault and criminal possession of a weapon.
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Conspiracy theories seem to be everywhere right now. Which isn't too surprising since 99% of us feel like we've been lied too repeatedly. One that I believe in, is the manipulation of certain markets. Here is another piece about the metals market manipulation.
FT's Tett Says "Foolish Simply to Deride or Ignore GATA"
Tett is an award-winning journalist and author and is the US managing editor of the Financial Times. She has been positive regarding gold and gold prices for some time due to the degree of financial and economic uncertainty in the world.
Tett wrote in Saturday’s FT that it would be “foolish” to “deride or ignore” GATA and their allegations, not regarding manipulation in the silver market, but manipulation of the gold market.
In an article entitled “Is there a shadowy plot behind gold?’ (see commentary), Tett wrote that “the idea of a central bank manipulating world markets packs an increasingly powerful emotional punch with voters.”
Tett acknowledged that central banks intervene in and manipulate interest rates and her article explored whether central banks might also be manipulating gold prices.
“For my money, though, I think there are at least two reasons why it would be foolish simply to deride or ignore Gata, “ Tett concluded.
Tett acknowledged that some of GATA’s points “have at least a grain of truth”.
“Even if you find it hard to believe that central bankers would be dastardly enough to create a plot – or competent enough to do what Gata claims – the fact is that global commodity markets are pretty murky, central banks are often opaque and western rhetoric about “free” markets is often hypocritical. Those issues merit far more debate, not just among journalists, but central bankers too.”
She concludes that “whatever the “truth” behind these plot tales, the one thing that is clear is that these accusations are unlikely to disappear soon. Not, at least, while the world’s economy remains so unstable and terrifying for ordinary mortals. Or, possibly, until that gold price really soars.”
Tett’s FT article may signal the beginning of a real debate about the allegations that GATA has made and that have yet to be rebutted.
It is an important debate as increasingly governments and central banks are distorting financial markets and the free market through constant interventions in markets.
In the western world, we have seen interest rates cut close to zero, capital injections and bailouts, lending guarantees, saving and deposit guarantees, favouring certain banks and institutions over others, banning short selling and now the latest intervention is the absurd - consideration of banning sovereign credit ratings.
At the same time competitive currency devaluations are taking place globally with central banks debasing currencies and outright intervention in currency markets in order to lower the value of national and supranational currencies.
Japan is the glaring example of this and Switzerland’s recent ‘pegging’ of the Swiss franc was in the same vein.
With governments surreptitiously and openly manipulating their currencies, it would seem like the logical that some governments might have an interest in not seeing gold and silver prices soar.
Surging gold and silver prices are a vote of no confidence in fiat paper currencies and government and central banks stewardship of these currencies. This is especially the case with the US dollar as the global reserve currency and all governments have an interest in maintain faith in the dollar and in fiat currencies which is a possibly motive for intervention in the gold and silver markets.
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In business news, Caterpillar had fantastic earnings. They are expecting 20% growth for 2012. Earnings have been pretty decent for most companies this quarter. The big question is, when are they going to start hiring again?
Wal-Mart has decided to offer a "Christmas Price Guarantee". If you find an item at a lower price anywhere, they will issue you a gift card for the difference. The promotion will run from Nov. 1- Dec. 25.
Cigna bought Healthspring for 3.8 billion dollars. They hope it will help jumpstart their business of selling Medicare to the elderly.
The Teleprompter in Chief will also be out today to announce a plan to deal with the housing crisis and student loans. I'll be glued to the TV...
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