Big loss for the US Treasury

On June 27^th the US Treasury Department announced the resignation of a top agency official; Jeffrey Goldstein, he will leave the domestic finance department at the end of July. He was overseeing the Dodd-Frank Act implementation and the chief architect of the Financial Stability Oversight Council. The reason released by the Treasury of his leave is because he wants to spend more time with his family, which is the yardstick reason many US government officials are given to resign. Goldstein, was a managing director of the World Bank and was a key person for the government’s involvement with Fannie Mae and Freddie Mac. Before he took the position of US Treasury official two years ago he had to pay at least $10.5 million to several investment partnerships according to his ethics filing. This doesn’t show a boast of confidence in the implementation and strategy for Dodd-Frank Act and the future of the US Treasury given a top official has left in such short time frame.

http://www.reuters.com/article/2011/06/28/usa-treasury-goldstein-idUSN1E75Q1ZG20110628

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aD6yvvScHUPM

Who's buying Treasuries?

Back on March 18^th 2011 I posted a chart showing that Bill Gross one of the largest bond managers of Pimco, has been dumping his Treasury holdings. This new chart shows that QE2 has been mainly funded (63%) by our very own Federal Reserve through their POMO program (see the 2^nd chart). So essentially the majority of the U.S. budget deficit is funded by central banks and with a sub 3% 10-year note who knows who else would buy bonds with the AFP reporting that the U.S. is already defaulting on their debt: http://ca.news.yahoo.com/china-ratings-house-says-us-defaulting-report-054309883.html

It seems from the 10-year breaking the 3% level that the treasury market might be pricing in some type of support for a QE3. I guess time will tell...

Fed takes on some TIPS

With the marginally dismal employment numbers and rumors flying around that housing is entering a second dip in which JPMorgan analysts revised their forecast for a housing bottom to occur sometime near mid 2011 at a peak trough decline of 34%. So with these somewhat uncertainties the Federal Reserve Bank of New York bought $1.44 billion in inflation-indexed Treasury debt today Tuesday June 7^th 2011 accounting for 19% of the dealer offered $7.77 billion in 2013-2041 Treasury Inflation Protected Securities. A significant headwind circulating the headlines around world are that energy and food prices are rising across the board due to inflation creeping in and staying around for the summer of 2011. So with this recent purchase does it mean that the Fed will continue to purchase more TIPS and continue quantitative easing measures? Here’s a simple Tip for our Fed stop spending money we don’t have. Here’s a look at the TIPS (an ETF tracked by Barclays) and the 10-year since 5/31/11’s announcement of the 9.1% unemployment rate: