Friday, August 6, 2010

Bill Gross Talks His Book on Treasuries; a Persuasive Case at Least for a Trade?


Pacific Investment Management Co.’s Bill Gross said the Federal Reserve is unlikely to raise interest rates for two to three years as it seeks to keep the economy from slipping back into recession.

Treasury two-year note yields dropped below 0.50 percent for the first time today after the Labor Department said the economy lost more jobs in July than economists forecast. The difference in yields between 2- and 10-year notes is 2.33 percentage points, more than double the average of 1.11 percent for the so-called yield curve over the past 20 years. The spread reached a record 2.94 percent on Feb. 18.

More reason to reach for yield despite the Federal deficit. The fact that "everyone knows" that buying long Treasuries is a dangerous investment is a positive for said trade/investment. Just like "everyone knew" that it was a New Era in investing in the late '90s and for homebuilding stocks 5 years ago.

Who knows, but in Japan, the 30 year Govvie yields 1.74%. So 3-3.5% in the country that continues a form of military occupation of Japan is certainly possible.

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