Tuesday, November 6, 2012

Three-year Treasury Yield at Seven-Month High

The U.S. Treasury auctioned $32 billion in three-year notes today at a yield of 0.392%. Demand was down, from a four-auction average of 3.73 times the amount sold to 3.41 times. As a result, the yield was the highest since April.

At some point, Treasury rates start to soar, because of the price inflation ahead and the amount of Treasury securities that will have to be sold because of the deficit.

You need to be out of long-term fixed-income securities now, when the break comes:

A. No one is going to ring a bell in advance.

B. The spike up in rates will be massive and quick.


  1. Japan has had low rates for decades.

    How many times are you going to say "at some point", "at some point", "at some point" when it comes to inflation and interest rates?

    You have been warning about higher prices and interest rates since forever.

    When will you say I am wrong? What if inflation and rates stay low as long as they have in Japan? Will you say "Oops, my theory sucks"?

  2. Robert,

    I know a guy that owns a lot of TIPS, thinking that they are a safe bet in uncertain times. I'm not knowledgeable of how TIPS work, but will they really be protected, as he thinks, if the treasury bubble bursts?