Thursday, December 31, 2009

Not Since the Movie "Grease" Hit Theaters Have Treasury Securities Had Such a Bad Year

Treasury securities are headed for a 2.5% loss this month -- and the biggest annual loss since "Superman" and "Grease" hit movie theaters more than three decades ago.

For the year, Treasurys of all maturities are on pace to lose 3.5% -- the biggest loss since 1978, according to an index compiled by Bank of America-Merrill Lynch. It will be the first annual loss since 1999, and only the fourth time Treasurys have lost money since at least 1978.

Merrill's month-to-date returns, which also account for price movements, show Treasurys of all maturities have lost 2.4% in December.

Like, I have said, given the debt the government needs to raise, over the next decade you will be able to make a career out of shorting the bond market.


  1. Can you ever envisage a scenario where Treasury paper is considered more risky, with correspondingly higher yields, than corporate, etc...? Thanks.

  2. I don't want to say it never can happen, but the Fed can always print money to buy any paper the Treasury issues. This could cause higher yields, but would impact all dollar denominated securities.

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