More bailouts and more moral hazard are clearly on the way.
So where's the Treasury going to get the cash to pay for this new loan to the Fed? From debt issue, of course.
Treasuries won't be in short supply for long, and there's plenty of demand for safety in the market. Investors fled risky assets his week for the stability of Treasuries, driving yields below inflaton.
Rolling short-term Treasuries in an age when tax receipts are declining in a recession does not make for a pretty Federal budget picture at all for 2009. I'm sticking to my belief that the yield curve will have to steepen at some point in the near future, and I'm not even thinking about going long fixed income until the Fed has begun raising rates.
A day after Fed officials seized control of American International Group Inc., the Treasury yesterday acted at the Fed's request to fortify the central bank's balance sheet with $100 billion in new cash. Fed officials can use the proceeds to pump money into financial institutions fearful of lending to each other, or to catch the next insolvent bank that's unable to raise capital.
So where's the Treasury going to get the cash to pay for this new loan to the Fed? From debt issue, of course.
Treasury Secretary Henry Paulson has worked with the Fed to manage the financial sector's cash crunch. The new bill auctions will help to ensure financial institutions have ready access to Treasury securities, which have been in short supply recently as firms try to maintain liquidity.
Treasuries won't be in short supply for long, and there's plenty of demand for safety in the market. Investors fled risky assets his week for the stability of Treasuries, driving yields below inflaton.
Yields on U.S. Treasury bills nudged ever closer to zero on Thursday as investors fled equities to the perceived safety of sovereign debt and fears grew about U.S. money funds after one had its ratings slashed to junk. One-month Treasury yieldsdipped to just 0.010 percent, from 0.040 percent late in New York on Wednesday.
Rolling short-term Treasuries in an age when tax receipts are declining in a recession does not make for a pretty Federal budget picture at all for 2009. I'm sticking to my belief that the yield curve will have to steepen at some point in the near future, and I'm not even thinking about going long fixed income until the Fed has begun raising rates.
