Treasury Bonds Slaughtered
Stock were boring again today, just up 52 points.
Bonds were where the action was. There was a technical breakout with increasing interest rates, and the 10 Year Treasury hitting 4.07%. News on why this happened below.
Oil fell over $4 today as the worries in supply evaporated, and the speculative longs got covered. Not so much with gasoline, but it fell a little too.
Gold fell $23, and presents another buying opportunity.
In the news today….
The revised GDP figure came out today, and it was revised upward from 0.6% to 0.9% for the first Quarter of 2008. One component of the GDP, Consumer Spending was up a whole 1.0%. My prediction of a downward revision was wrong – oh well. But consumers are continuing their increased spending, so I guess we don’t have to worry about the continuing layoffs, higher gasoline prices, and housing meltdown.
Your Dinner Conversation Tonight….
The FEDs announced they will have three $75B auctions to banks in June. Paulson, Bernanke and your local banker are saying the problems are all solved with the US economy – so why has the number of these auctions increased???? The simple answer is that the FED thinks that banks need the additional liquidity, and needs to offload those lousy securities they are holding, to the FED for collateral.
US Treasury Bonds got slaughtered today. There was a 5 year Treasury auction, and there was a very low demand for their purchase. More interestingly, foreign banks only purchased 16.5% of these bonds, and this is half of the normal amount foreign banks have bought recently. This could be a very ominous event, and here’s why.
Foreign banks have to do something with all those dollars flowing into their country. Normally, they come back to the US, and purchase bonds, stocks or companies. They know that the US dollar is becoming more worthless, but they don’t have a lot of alternatives. If they are not buying US bonds, that means US interest rates are going to start climbing. This is what happened today in a big way.
The question for you tonight is “Is the US Bond market signaling a major change in interest rate trends in the US, and if so, how high will they go?”
Here are today’s numbers:
Dow Jones 30 Industrial – 12,646 (up 52 points)
10 Year Treasury Bond – 4.08% (up 0.07%) – BONDS BREAK OUT OF TRADING RANGE!!!!!
Euro – 1.5510
Gold – $882 (down $23) – buying signal here.
Oil – $126.62 (down $4.41)
Gasoline – $3.40 (down $0.04)
