TREASURIES-Sell off in Europe on tax cut worries

[mahatmakanejeeves]

Source: Reuters

Wed Dec 8, 2010 7:21am EST

By Emily Flitter and Hideyuki Sano LONDON/TOKYO, Dec 8

(Reuters) - U.S. Treasury prices fell sharply on Wednesday, pushing yields higher, as a proposed extension of tax cuts stoked fears over the U.S. government's control of the budget deficit.

... "The market is suffering still in the aftermath of the compromise on the tax agreement between Obama and the Republicans," said Nick Stamenkovic, bond strategist at RIA Capital Markets Edinburgh.

... Economists have estimated that extending the tax cuts could boost U.S. GDP next year by between half and one full percentage point.

However, some analysts say that as the cuts would be paid for by further borrowing they raise concerns over fiscal sustainability.

Read more: http://www.reuters.com/article/idUSLDE6B70XD20101208

[daa]

1. And a central bank advisor in China said the US

is far worse off that Europe and should not be adding another Tillion to the deficit.

[LiberalFighter]

2. Fire Geithner. He helped negotiate the deal.

[xchrom]

3. Lol! I wonder if they thought that would be the reaction. Nt

[bemildred]

4. "Austerity" for the rich. Share the pain. nt

[SOS]

5. When do the bucket shop vultures start betting against US bonds?

Give it another 18 months.
Ireland here we come.

How amusing that Bernanke's quantitative easing (bank welfare program) is being undone
by the President and the Republican Senate.

At least those who depend on bond income for retirement will get a few extra bucks.
At least until China and the Wall Street hedge funds decide to move in for the kill.

Then we'll be living in a Russian-style neoliberal paradise.
Cooking moldy potatoes in a rusted paint can.

[mahatmakanejeeves]

12. "Cooking moldy potatoes in a rusted paint can."

Don't knock it; it will provide you with your recommended daily allowance of iron.

[OlympicBrian]

6. Bond sell off will only get worse

What kind of fool would hold onto any type of US bonds right now?

The tax proposal is not only awful, it will likely crash the US bond markets...

Although debt-rating agency Moody's is afraid to cut the US's credit rating, I believe there will be an "unspoken" downgrade if/when the President's tax package passes, due to the amount it adds to the deficit. This, coupled with a "cross-contagion" association with state debt problems, and rising inflation (as illustrated by the recent Fed beige book), and the fact that the bond market is in a bubble, will likely lead to a bond market crash.

Tax cuts could hurt Moody's U.S. rating: report
SAN FRANCISCO (MarketWatch) -- U.S. sovereign debt ratings from Moody's Investor Service could be hurt by extended tax cuts in the long term, Reuters reported Tuesday. Moody's lead analyst for U.S. sovereign debt, Steven Hess, told Reuters he is not concerned by an extension of the Bush tax cuts on the U.S.'s AAA rating over the next 18 months to two years, but he is worried about what happens after two years when the extensions are set to expire again. "We have long term concerns about the (U.S. credit) outlook and they are not yet being addressed. We're waiting to see if they're going to be addressed in the next couple of years," Hess told Reuters in an interview.
http://www.marketwatch.com/story/tax-cuts-could-hurt-moodys-us-rating-report-2010-12-07

Here is the story about debt at the state level, in case you missed it:
Mounting Debts by States Stoke Fears of Crisis
http://www.nytimes.com/2010/12/05/us/politics/05states.html?_r=2&nl=todaysheadlines&emc=a2http://www.nytimes.com/2010/12/05/us/politics/05states.html?_r=2&nl=todaysheadlines&emc=a2

Note especially the graph that comes with this story:
http://www.nytimes.com/imagepages/2010/12/05/us/05states_graphic3.html?ref=politics

Soon, investors will start to panic as they see their bond holdings tank.

[SOS]

10. Question

Any idea where we can find the current basis point number on treasury default swaps?
I just spent half an hour looking for the it, but it seems to be a Wall Street State secret.
All I could find was this ominous chart from 2008.



Keeping an eye on the hedge fund vultures would give us a more accurate picture of the decline of the United States.
But it seems they don't want the proletarians to know what they're up to.

[OlympicBrian]

11. Only available to "privileged traders" within that market, I believe

Though some of this information is presented in the financial market press at times.

[sasha031]

7. Paul Krugamn once wrote an article titled

" Don't cry for me Argentina, we'll be crying with you " this is back in the early Bush days.

later updated "Don’t Cry for Me, Americ
http://www.nytimes.com/2008/01/18/opinion/18krugman.html

[OlympicBrian]

8. K&R

[Liberalynn]

9. Nice job Boner and Obama