Another Benchmark Record

A cyber-bud just posted the fact that the five-year Treasury Note has traded at 0.75% yield, another record low.

Think about it.  The world capital markets are willing to give the US money for five years, and get their dollars back with a whopping 0.75% interest per year.

The real money is shouting at us that our deficits are not the issue.  Are you listening?

On another front, speculators and hedgers got a new toy today, or, more precisely, gave the unwashed masses access to one of their leveraged toys.  My inbox this morning had a short blurb from Jody Shenn at Bloomberg about a house price index opening up for public trading on the CBOE (the options market).

It’s not ground-breaking, since the cross-town rivals at the CME have traded the Case-Schiller contracts for a while now, but the Radar Logic data set is so much larger that we may see some very sophisticated players look for arbitrage between the two, especially on a city-by-city basis.

More to the point, offering a way to hedge against falling home prices to the public at this point sounds like nailing the barn door shut to make sure the horses can’t get back in.



5 Responses to Another Benchmark Record

  1. Bruce B says:

    Yes, we’re listening. Can deficits go to infinity? If not, then where is the optimal point and who is going to tell the government to stop borrowing when they hit that point? Will they stop borrowing then?

  2. hhill51 says:

    Aye, there’s the rub!
    Call me an irrepressible optimist, but I think the next growth phase is in the works, and I hope with all my being that it raises the broad base worldwide. The 1% will be richer than they could be in any other world if we see the middle class strengthened globally.
    I think we have more of a revenue problem than a spending problem, though the inefficiency of “systems” like our hybrid public/private health care mess, or the ever-more privatized military and security infrastructure just drive me nuts. Easy to go crazy on the government procurement that pays $17K for a toilet seat, but why doesn’t anyone ask about the private company that gamed the system so that their $17K toilet seat became the winner of the contract?

  3. Conscience of a Conservative says:

    What impresses me Howard is that the two year is around 22 bps, the three year is 32 bps, and our Nations biggest banks get to earn a rate right in the middle without taking any duration risk what so ever keeping it at the Fed, while everyone else is forced to invest in a High Yield ETF( HYG). Most prices are governed by the laws of supply & demand and with money the price is the interest rate, but unfortunately the Fed has the ability to create an unlimited amount of money and/or credit that this mechanism is now missing. The seeds the Fed is sowing will not end well!

    • hhill51 says:

      As I was saying last night to a friend that has nothing to do with investments — if you really look at what they do, every central banker in every economy and every political system actually has the exact same prime directive. They all put keeping their banks healthy as their most important job. This transfer from taxpayers and savers to recapitalize US banks has gone on for about four years now, and might continue for several more. Anyone who thinks their political choice makes any difference hasn’t recognized the fact that bankers (as a tribe) truly believe their role in the world supercedes all others, making politics or even complete political systems irrelevant.

      • Conscience of a Conservative says:

        On that I agree. Michael Pettis talks about a similar transfer(read tax) taking place in the Chinese banking system.

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