Bell Rings for Bond Bubble

By: Michael Pento | Wed, Feb 8, 2012

They always tell you no one rings a bell when a market top or bottom is reached. But a bell is now ringing for the end of the thirty-year bull market in U.S. debt. And ironically, the bell ringer is our very own U.S. Treasury!

The U.S. Treasury Borrowing Advisory Committee, which brings together dealers and Treasury officials, met last week in a closed meeting at the Hays Adams Hotel. The committee members unanimously agreed that the Treasury should start permitting negative interest rate bids for T-bills. In other words, newly issued T-bills from the Treasury would offer investors a guaranteed negative return if held to maturity. The mania behind the U.S. debt market has reached such incredible proportions that investors are now willing to lend money to the government at a loss; right from the start of their investment. This is a clear signal that the bond market can't get any more overcrowded and can't get any more overpriced.

http://www.safehaven.com/article/24302/bell-rings-for-bond-bubble

Note: The Swiss Central Bank was considering negative nominal rates on its short dated treasuries, but turned hard about face sudddenly, and devalued against the Euro. The Americans must think that the same strategy can be used to devalue the currency.

Nominal rates have been negative at the short end of the yield curve in Germany and Switzerland up to two years treasuries or bunds, and at the ECB in the Euro Area Yield Curve temporarily on the 3-mo. treasury.

Pesumably allowing for negative nominal rates will automatically devalue the currency, though the tax code must be re-written to allow a tax write off for negative interest rates.

-F6