Record emission burdened U.S. government bonds

The debts of the United States are high, but money in the capital market, the U.S. always: This statement is still true. But in practice it is increasingly difficult. With this week goes Washington $ 63 billion in bonds. The prices of the Treasuries are already in free fall.
Because emissions upcoming record losing American government bonds more attractive. 2009 cut German papers so far much better than U.S. bonds: The yield spread between German government bonds with ten-year Treasuries, and shrank from 90 to now almost 3 basis points. Treasuries lost in the first two months of the year 3.6 percent, which is the biggest negative for five years. Returns and develop courses in fixed income securities in opposite directions.

This week the U.S. has moved a total of $ 63 billion in securities. Solo on Tuesday, the issuance of $ 34 billion in bonds with a maturity of three years. This is reflected in increasing returns again. Before the auction, the five-year Treasuries yields by five basis points to 2.91 percent. Also Treausuries with 30-year maturity quoted weaker, the yield rose by seven basis points to 3.64 percent. “The upcoming auction with a total volume of 63 billion dollars will be anything but easy to get and exchange rate gains even with collapsing stock markets limit”, write the Bond experts of HSH Nordbank in a research report.

Borrowing of $ 2500 billion
The record borrowing is a consequence of massive government spending. President Barack Obama with a lift-billion dollar economic program, help for homeowners and a new bank rescue plan against the dramatic economic downturn. On 17 February Obama the “Recovery Bill” in the amount of $ 787 billion. Obama has set itself the goal of 3.5 million new jobs to create or maintain existing ones.

Obama’s program costs: Overall planning of the new U.S. President for the current year, with record spending of nearly 4000 billion $. In addition to the initiatives already adopted the draft budget provides for Obama again a buffer of $ 250 billion for bank rescues possible before. The budget deficit is rising at 1750 billion dollars. This corresponds to approximately twelve percent of GDP. Market participants are now owned by an issuing volume of the Treasury in 2500 from $ billion.

So far, the demand for U.S. securities unabated. The previous three years of issuance of documents on 10 February was 2.7 times oversubscribed. The average of the ten past emissions amounted to a value of 2.4. Experts are, however, a majority agreed that the yield level will rise: “The auction calendar is incredibly packed. It is now six auctions each month. This burden on the treasuries,” said Prakash Suvrat, interest rate strategist at BNP Paribas.

“The yields will rise,” said Yasutoshi Nagai, chief economist at Daiwa Securities. He expected ten-year Treasuries for a yield of 3.7 percent. In the past five years, they averaged 4.26 percent.

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