The assault on sovereign treasuries continues. It is painful to watch. As the Chinese story of torture goes, it is a death by 1,000 cuts. The benchmark of world economies, The United States of America, being brought down by debt and bankers. It is not only the US, but all of the G7 countries except currently Canada. This report appeared in Bloomberg today just continues to confirm my worst fears; the banksters are winning and are right on schedule.
March 22 (Bloomberg) — The bond market is saying that it’s safer to lend to Warren Buffett than the United States of America. Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. Debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.
The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.
“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.”
While Treasuries backed by the full faith and credit of the government typically yield less than corporate debt, the relationship has flipped as Moody’s Investors Service predicts the U.S. will spend more on debt service as a percentage of revenue this year than any other top-rated country except the U.K. America will use about 7 percent of taxes for debt payments in 2010 and almost 11 percent in 2013, moving “substantially” closer to losing its AAA rating, Moody’s said last week.
All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, Lipsky said in a speech yesterday at the China Development Forum in Beijing. Already this year, the average ratio in advanced economies is expected to reach the levels seen in 1950, after World War II, he said.
As of today, the US debt-to-GDP ratio is over 88%. I have written recently on several occasions concerning this worry. At our current rate we will exceed a 100% ratio by the end of 2010, maybe even earlier than the end of the fiscal year.
“It’s a manifestation of this avalanche, this growth in U.S. Treasury supply which is under way and continues for the foreseeable future, and the comparative scarcity of high-quality credit, particularly in shorter-maturity debt”, said Malvey, whose Lehman team was ranked No. 1 in fixed-income strategy by Institutional Investor magazine from 1998 through 2007.
Last year’s $2.1 trillion in borrowing by the government exceeded the $1.08 trillion issued by investment-grade companies, the biggest gap ever, Bloomberg data show. Malvey said the last time he can recall that a corporate bond yield traded below Treasuries was when he was head of company debt research at Kidder Peabody & Co. in the mid-1980s.
While Treasuries are poised to make money for investors this quarter, they are losing momentum. The securities are down 0.43 percent in March after gaining 0.4 percent last month and 1.58 percent in January, Bank of America Merrill Lynch indexes show.
Deutsche Bank and Barclays Plc, two of the 18 primary dealers of U.S. government securities that are obligated to bid at the Treasury’s auctions, say balance sheets of high-rated companies make them more attractive than Treasuries.
Corporate borrowers are reducing debt at a record pace. Companies in the S&P 500 cut their liabilities by $282 billion to $7.1 trillion in the fourth quarter from the prior three months, Bloomberg data show. That represents 28 percent of assets, the least in at least a decade.
Investors are accepting smaller premiums to lend to companies, with yields on bonds rated at least AA falling to within 107 basis points of Treasuries on average, Bank of America Merrill Lynch indexes show. That’s down from the peak of 515 basis points in November 2008, and approaching the record low of 36 in 1997.
The last time there was talk of the U.S. losing its status as the world’s benchmark for bonds was in the late 1990s, when the government began amassing budget surpluses in 1998 for the first time in almost three decades. The amount of Treasuries outstanding dropped 8 percent to $3.4 trillion in 2000, the biggest annual decline since 1946.
Treasury supply resumed growing in 2001 after two rounds of tax cuts proposed by President George W. Bush led to deficits. Outstanding Treasury supply rose 53 percent to $4.5 trillion in 2007 from 2000 as the U.S. borrowed to finance tax cuts intended to revive a slumping economy. The amount has since risen 64 percent to $7.4 trillion. More is on the way. The U.S. will sell a record $2.43 trillion of debt in 2010, according to the average forecast of 10 of the 18 primary dealers in a Bloomberg survey. At the same time Treasury sales are rising, the cash position of the largest corporations is swelling. Companies in the S&P 500 held a record $2.3 trillion as of the fourth quarter, Bloomberg data show.
I want you to pay particular attention who is presenting this information to the public. It is the same army of “experts” that I pointed out in my most recent previous article that is waging the war to bring governments to their knees in preparation for the argument of one world government, one central bank, and one world currency. It is a lot closer than even most experts imagine. For example, if you would have suggested in even 2007 that corporate bonds would bring lower return rates that Treasury bonds you would have been laughed out of town. No one is laughing now except the bankers.
It is also interesting to note that corporations are LOWERING their debt to the lowest level since at least 2000 and I suspect a lot earlier than that date. We will see at the end of the fiscal year just how significant that number becomes.
Now pay close attention, the billionaires in the US rose significantly during the last year in this economic crisis and the AVERAGE billionaire appreciated $500 million in asset growth in 2009 alone! And you wonder where your money went! Not only is your money and potential for earning and appreciating more income being taken from you, they are slapping us as citizens so far into debt we will never see the light, nor will our children, or our grandchildren, or their children. Never mind, go back to sleep.
Here is Uncle Willie’s Thought for the day: