Moody’s Investors Service on Friday lowered its ratings outlook on the United States’ government to negative from stable, pointing to rising risks to the nation’s fiscal strength.
They do that just to sound relevant. Their ratings nonsense was never impactful to US Treasury yields, and became even less so after they were caught selling ratings on MBS products in the fallout from the Great Financial Crisis.
Some bits of news can be safely ignored. Moody's ratings bloviations are among them
Thank you for this update! I just saw Hakim Jeffries calling for maintaining spending at the Covid levels because that is the “status quo”. He appears to be completely ignorant of the destruction that the unaffordable interest on the escalating national debt (let alone the debt itself) is wreaking, and will increasingly wreak, on the US and world economy.
Do they release any info on who is buying the bonds? For example, categories of foreign vs domestic buyers, or by country? I ask because if today is a case of China buying far fewer bonds than in the past, maybe you can infer interesting things into that....
The public data does not include discrete breakdowns of bond buyers. You usually get a percentage of bonds purchased by the primary dealers (who pretty much have to buy), and the reason the auction became a yield clown show was because the primary dealers were having to buy much more than usual.
Of course, over on Twitter/X there are people who see this and immediately assume this means that no one is buying Treasuries, that China is about to take over the world, and the dollar is about to become worthless. (none of which is actually the case)
China, of course, is grappling with its own issues, and if China's not buying US Treasuries it's probably because they are facing their own funding issues and aren't able to. There was a small liquidity crisis in China earlier this week that I'm still researching, and with China's overall economy tipping into deflation, it is still a question mark which country is in the lead in the global race to the bottom.
It's far more likely that what is happening is that banks are getting skittish about buying Treasuries, because the portfolios they've been holding since COVID are now losing value (because that's what happens to fixed income investments when interest rates go up). If interest rates are going to move higher banks aren't going to want to buy Treasuries as an investment because the only model where that investment makes sense is in a hold to maturity model.
Until the Fed says "interest rates aren't going any higher" the market's appetite for Treasuries is likely to be diminished. Of course, the Fed says they want this, so I'm sure right about now Janet Yellen is sticking pins in her Jay Powell voodoo doll muttering some very unlady-like sentiments about the Fed Chair!
You have a talent for explaining financial matters clearly and succinctly - thank you!
And I’m looking forward to reading what you find out about China’s small liquidity crisis. Ha - how does THAT work in a command economy? As you’ve repeatedly said, “you can’t push a string”....
I'm not sure they're playing games. I really think they are just that stupid.
When we look at economic data, we have to explain it by means of a broad conceptual model which explains why certain events produce certain results. This morning's challenge was explaining why, with a shrinking money supply and a shrinking Fed balance sheet, market interest rates had been trending down.
Then I read about yesterday's Treasury auction and the yield spike (this morning's article was already in the can), and so I have to ask myself, "does this fit with what I've been saying?" And, as it turns out, it does.
Moody’s Investors Service on Friday lowered its ratings outlook on the United States’ government to negative from stable, pointing to rising risks to the nation’s fiscal strength.
https://www.cnbc.com/2023/11/10/moodys-cuts-usa-outlook-to-negative-citing-higher-interest-rates-and-deficits.html
They do that just to sound relevant. Their ratings nonsense was never impactful to US Treasury yields, and became even less so after they were caught selling ratings on MBS products in the fallout from the Great Financial Crisis.
Some bits of news can be safely ignored. Moody's ratings bloviations are among them
Moodys showed their true colors in the subprime crisis.
Thank you for this update! I just saw Hakim Jeffries calling for maintaining spending at the Covid levels because that is the “status quo”. He appears to be completely ignorant of the destruction that the unaffordable interest on the escalating national debt (let alone the debt itself) is wreaking, and will increasingly wreak, on the US and world economy.
A Democrat that is completely ignorant....
What are the odds?
Do they release any info on who is buying the bonds? For example, categories of foreign vs domestic buyers, or by country? I ask because if today is a case of China buying far fewer bonds than in the past, maybe you can infer interesting things into that....
The public data does not include discrete breakdowns of bond buyers. You usually get a percentage of bonds purchased by the primary dealers (who pretty much have to buy), and the reason the auction became a yield clown show was because the primary dealers were having to buy much more than usual.
Of course, over on Twitter/X there are people who see this and immediately assume this means that no one is buying Treasuries, that China is about to take over the world, and the dollar is about to become worthless. (none of which is actually the case)
China, of course, is grappling with its own issues, and if China's not buying US Treasuries it's probably because they are facing their own funding issues and aren't able to. There was a small liquidity crisis in China earlier this week that I'm still researching, and with China's overall economy tipping into deflation, it is still a question mark which country is in the lead in the global race to the bottom.
It's far more likely that what is happening is that banks are getting skittish about buying Treasuries, because the portfolios they've been holding since COVID are now losing value (because that's what happens to fixed income investments when interest rates go up). If interest rates are going to move higher banks aren't going to want to buy Treasuries as an investment because the only model where that investment makes sense is in a hold to maturity model.
Until the Fed says "interest rates aren't going any higher" the market's appetite for Treasuries is likely to be diminished. Of course, the Fed says they want this, so I'm sure right about now Janet Yellen is sticking pins in her Jay Powell voodoo doll muttering some very unlady-like sentiments about the Fed Chair!
You have a talent for explaining financial matters clearly and succinctly - thank you!
And I’m looking forward to reading what you find out about China’s small liquidity crisis. Ha - how does THAT work in a command economy? As you’ve repeatedly said, “you can’t push a string”....
Thanks, Peter, and they're playing games...and, again, the taxpayers are going to be holding the buck when it comes time to pay up...so sad!
I'm not sure they're playing games. I really think they are just that stupid.
When we look at economic data, we have to explain it by means of a broad conceptual model which explains why certain events produce certain results. This morning's challenge was explaining why, with a shrinking money supply and a shrinking Fed balance sheet, market interest rates had been trending down.
Then I read about yesterday's Treasury auction and the yield spike (this morning's article was already in the can), and so I have to ask myself, "does this fit with what I've been saying?" And, as it turns out, it does.
It's what makes the analytics fun! :P