from Bloomberg:
The central bank plans to buy Treasuries due from March 2011 to April 2012 today and from September 2013 to February 2016 tomorrow, according to its Web site. The Fed has more than doubled the size of its balance sheet to $2.09 trillion in the past year by purchasing financial assets including Treasuries in an effort to spur growth.
U.S. bonds may still fall, the survey showed. An index measuring investors’ outlook for Treasuries through the end of June declined to 43 for the seven days ended April 9 from 44 in the previous week. A reading below 50 means investors expect prices to drop. Ried Thunberg surveyed 25 fund managers controlling $1.35 trillion.Fed purchases have created a Treasury market “bubble” that may keep growing, said Jim Rogers, an investor and author of the book “Hot Commodities.” The Fed, like the Bank of Japan before it, is supporting government debt, he said.
“In Japan, long-term bonds were yielding one half of one percent at one time,” Rogers said on Bloomberg Television in an interview from Singapore, where he lives. “This can go to absurd levels, and bubbles usually do.”
Yields suggest U.S. credit markets haven’t fully recovered after last year’s decline.
Fed Chairman Ben S. Bernanke’s efforts to spur growth may result in a higher cost of living, said Allan Meltzer, the central bank historian and professor of political economy at Carnegie Mellon University in Pittsburgh.
Inflation “will get higher than it was in the 1970s,” Meltzer said. At the end of that decade, consumer prices rose at a year-over-year rate of 13.3 percent. Rising costs erode the value of the fixed payments from bonds.
Thirty-year U.S. Treasury bonds jumped over a full point in price on Monday as the stock market fell sharply at the open, with the Dow falling more than 1 percent.
Treasuries are showing significant strength in morning trading on Monday, as investors move into the safety of government backed bonds amid continued earnings anxiety on Wall Street.As the influx of earnings reports continues, traders digested news that General Motors (GM) has been told to prepare for a bankruptcy filing by the U.S. Treasury Department, further prompting moves into guaranteed returns.
The benchmark ten-year note has shown a notable upward move in the early going, moving firmly into positive territory. Subsequently, the yield on the note has fallen to 2.863 percent, a fall of 6.3 basis points on the day.
Investors sought security in their investments as they considered dim prospects for one of the nation's largest car manufacturers.
