LA Times cites Treasury’s ‘manipulation’ of bond market

Good thing the world has Jon Nadler at Kitco and Philip Klapwijk at GFMS to provide assurances that such manipulation could never happen in the gold market.

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By Tom Petruno, Los Angeles Times

This week couldn’t end fast enough for the Treasury bond market or the dollar, both of which were hammered again today as investors bailed out in thin pre-holiday trading.

The yield on the 10-year T-note jumped to 3.45%, up from 3.35% on Thursday and 3.14% a week ago. The yield now is the highest since mid-November.

So much for the idea of Treasuries being a haven: The iShares Barclays 20+Year Treasury exchange-traded fund, which owns long-term government bonds, has lost 22% of its value since the start of the year as rising market yields have depressed older bonds’ prices.

In the currency market the euro shot up to a five-month high of $1.40 from $1.39 on Thursday and $1.35 a week ago. The dollar also slumped further against most other major currencies and a lot of minor ones.

As for the stock market, it performed a modest levitation act for much of today’s session, only to surrender to gravity in the last hour.

Global investors and traders suddenly seem to have every reason in the book to sell Treasuries and the greenback, and no reason to buy.

One camp, for example, is betting that the economy has bottomed and that it’s smarter to bet on riskier investments, such as corporate junk bonds, stocks and emerging-market currencies, than on low-yielding Treasuries or the dollar.

Another camp is worried that the unprecedented surge in U.S. government borrowing (to bail out the economy) finally has become too much for the market to bear, fueling fears of an even bigger spike in T-bond yields ahead.

“I think the supply dynamic is just getting overwhelming,” said Tom Tucci, head of Treasury trading at RBC Capital Markets in New York.

What’s more, Standard & Poor’s rattled bond investors on Thursday after it warned that Britain could lose its AAA credit rating because of that government’s soaring debt load. S&P didn’t say anything about Uncle Sam’s AAA rating, but the markets made the link anyway, as noted in this post. That too was a downer for the dollar.

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