Investor Jim Rogers said the US Federal Reserve will probably start buying Treasuries to keep borrowing costs down, staving off a bear market.
Fed chairman Ben Bernanke said last week that the US central bank will use ‘all the tools’ available to revive economic growth, indicating that the central bank is closer to buying, Mr. Rogers said.
Record government borrowings will lead to losses later, said the chairman of Singapore-based Rogers Holdings and author of the books Hot Commodities and Adventure Capitalist.
‘He’s setting things up for a gigantic fall down the line, but that does not mean he can’t drive long-term interest rates to zero,’ Mr. Rogers said. ‘Governments are printing money everywhere, borrowing stupendous amounts. Throughout history that has led to problems in the bond markets, and it will this time too.’
Merrill Lynch & Co told clients last week that Treasuries will have a ‘siren song’ rally before falling in the second quarter.
‘We will continue to forcefully deploy all the tools at our disposal as long as necessary to support the restoration of financial stability and the resumption of healthy economic growth,’ Mr. Bernanke said in a speech in Dillon, South Carolina. He first discussed the possibility of Fed purchases of longer-term Treasuries on Dec 1.
New York Fed Bank president William Dudley said on March 6 that policy-makers had decided for the time being not to expand the range of securities that the central bank purchases to longer-term Treasuries.
The Fed cut its target for overnight loans between banks to a range of zero to 0.25 per cent in December and has more than doubled its assets to US$1.9 trillion in the past year. Goldman Sachs Group Inc, one of the 16 primary dealers required to bid at the Treasury auctions, estimates that the US will almost triple debt sales this year to a record US$2.5 trillion.
‘The impact of the relentless flood of Treasury supply’ will help send yields higher, Merrill said on March 5 in a note from economists including David Rosenberg in New York. The company is part of Bank of America Corp, another primary dealer.
Mr. Rogers said he unwound in the fourth quarter so-called short positions that would benefit from declines in Treasuries. He ‘made a loss’ betting that notes would decline, he said.
‘I am waiting to short them again,’ he said. ‘I have no idea when. US government bonds are going to be one of the great shorts of our time somewhere down the road.’ Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.
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Fed setting things up for a big fall: Jim Rogers
Bloomberg
10 March 2009
Investor Jim Rogers said the US Federal Reserve will probably start buying Treasuries to keep borrowing costs down, staving off a bear market.
Fed chairman Ben Bernanke said last week that the US central bank will use ‘all the tools’ available to revive economic growth, indicating that the central bank is closer to buying, Mr. Rogers said.
Record government borrowings will lead to losses later, said the chairman of Singapore-based Rogers Holdings and author of the books Hot Commodities and Adventure Capitalist.
‘He’s setting things up for a gigantic fall down the line, but that does not mean he can’t drive long-term interest rates to zero,’ Mr. Rogers said. ‘Governments are printing money everywhere, borrowing stupendous amounts. Throughout history that has led to problems in the bond markets, and it will this time too.’
Merrill Lynch & Co told clients last week that Treasuries will have a ‘siren song’ rally before falling in the second quarter.
‘We will continue to forcefully deploy all the tools at our disposal as long as necessary to support the restoration of financial stability and the resumption of healthy economic growth,’ Mr. Bernanke said in a speech in Dillon, South Carolina. He first discussed the possibility of Fed purchases of longer-term Treasuries on Dec 1.
New York Fed Bank president William Dudley said on March 6 that policy-makers had decided for the time being not to expand the range of securities that the central bank purchases to longer-term Treasuries.
The Fed cut its target for overnight loans between banks to a range of zero to 0.25 per cent in December and has more than doubled its assets to US$1.9 trillion in the past year. Goldman Sachs Group Inc, one of the 16 primary dealers required to bid at the Treasury auctions, estimates that the US will almost triple debt sales this year to a record US$2.5 trillion.
‘The impact of the relentless flood of Treasury supply’ will help send yields higher, Merrill said on March 5 in a note from economists including David Rosenberg in New York. The company is part of Bank of America Corp, another primary dealer.
Mr. Rogers said he unwound in the fourth quarter so-called short positions that would benefit from declines in Treasuries. He ‘made a loss’ betting that notes would decline, he said.
‘I am waiting to short them again,’ he said. ‘I have no idea when. US government bonds are going to be one of the great shorts of our time somewhere down the road.’ Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.
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