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Thread: FED bought a stunning 61% of all net US government debt issuance in 2011

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  3. #32
    Member Zippyjuan's Avatar
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    Thanks. It still does not say what time-frame and they don't provide any link to their data source other than saying Barclays.

    Report from September, 2011 says that 70% of US debt being issued was less than five years (hence the low figure I found of only $55 billion in 30 year notes even issued) so there is little long term US debt for any investors to buy.
    http://www.reuters.com/article/2011/...7803QD20110901
    That will be bad news when interest rates begin to rise again since the costs of replacing those for the US Treasury will be a lot higher. They need to issue more longer term debt to lock in lower rates for themselves (and taxpayers) as well.

    (Reuters) - Insatiable demand for safe haven U.S. government bonds is helping mask a potentially huge financial problem -- the need to extend the maturity of debt issued by the United States.

    The United States has the least balanced maturity schedule of any major nation. Over 70 percent of its bonds mature within 5 years, compared with an average 49 percent for the 34 member countries in the OECD.

    This leaves the country extremely vulnerable to any shift in investor sentiment at a time when its debt load has almost doubled in four years.

    Marketable U.S. debt has risen to over $9 trillion, from around $5 trillion in late 2007, before the government increased spending to bail out struggling financial companies.

    If sentiment were to shift quickly, it could send the cost of refinancing the country's bonds sharply higher. This would, in turn, eat into its budget and ability to meet long term obligations.

    In a worst-case scenario the country might not be able to refinance at all.

    "There has never been a single example in the history of finance where financing long-term liabilities, which we are, with short-term debt, ends well," said Mitch Stapley, chief fixed income officer at Fifth Third Asset Management in Grand Rapids, Michigan.

    The Treasury has been extending the average maturity of its debt. However, with proportionally few longer-term bonds and large long-term liabilities, more work is needed.
    Last edited by Zippyjuan; 04-04-2012 at 03:49 PM.
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  4. #33

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    Quote Originally Posted by Zippyjuan View Post
    Thanks. It still does not say what time-frame and they don't provide any link to their data source other than saying Barclays.
    I think it means "under Operation Twist" (announced on September 21 2011: http://www.federalreserve.gov/newsev.../20110921a.htm ) until the publication of the article in February 2012.

  5. #34

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    We know the Fed wanted to drive down rates, so why are we surprised that it bid up the price of US Treasuries to do so?

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