Morgan Stanley Forecasts 5.5% 10 Year Note as U.S. Faces Deficits

December 29, 2009 by · Leave a Comment
Filed under: Currency News 

There is a battle taking place right now between the bulls and bears.  At this point almost every analysis is extremely bullish on the growth prospects in the U.S. for 2010.  I have heard today alone for GDP estimates from 3.5 to 5.5% in 2010.  With 10% unemployment, I would be very surprise to see how we would produce those growth targets.

When I hear and read everyone staying the same predictions it makes me think it is now a good time to see if it would be beneficial to be on the opposite side of this trade.  Maybe shorting the 10 year bond is the move for 2010???

Bloomberg – If Morgan Stanley is right, the best sale of U.S. Treasuries for 2010 may be the short sale.  Yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the biggest annual increase since 1999, according to David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

Investors are demanding higher returns on government debt, boosting rates this month by the most since January, on concern President Barack Obama’s attempt to revive economic growth with record spending will keep the deficit at $1 trillion. Rising borrowing costs risk jeopardizing a recovery from a plunge in the residential mortgage market that led to the worst global recession in six decades.

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10-year Treasury yield raises to 4% due to sloppy auction

June 10, 2009 by · Leave a Comment
Filed under: Currency News 

It can not be a good sign when fixed income trader called the Treasury auction “sloppy”.  With the 10-year at 4%, we can expect that the longer portion of the “yield curve” is going to steepen.  This does not bode well for future interest rate which will need to go much higher to match future inflation expectations.  With the amount of money that has been pumped into our economy through our banking system and with interests at historic lows, inflation is the obvious policy of the day.

News (Reuters):

U.S. Treasury prices fell on Wednesday, sending benchmark yields to 4.0 percent for the first time in eight months, after an auction of 10-year notes heightened concerns over the burgeoning U.S. budget deficit.

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