Wriiight

Ultrashort Lehman 20+ Year Treasury Is Rocking

You say: "the higher this instrument goes - the worse it is for our country."

If the treasury coupons are just steepening (the lower maturities stay low) than it isn't catastrophic, the US will still have cheap financing for a while longer. Also, the long term rates are crazy low, and I don't see why having long term treasury yeilds up to 6 or so is a disaster. On the other hand it also makes non-government long term bonds less likely to come back from the crisis.

At the very least be happy that you aren't yourself pushing the bond yields up, the volume on the real thing is way to high for the ETF to have any real effect on the market.

10 More Notes for the Current Crisis

"Consider ... Fannie Mae (FNM). Where does the bailout end?"

Or possibly, 'When does the bailout start'? For the GSEs haven't drawn upon their $100B as of yet. So far they still have the cash to lock away in their loan-loss reserves and their current operations are profitable. The future cost of projected loss weigh heavily upon their future outlook, but there is still hope to pull through. If you examine the numbers Fannie put out yesterday, you will see the bulk of their losses come from losing the ability to use their tax credits and from having to stock away more money into their loan loss reserve account as their projected future losses are adjusted higher. The GSEs are not quite the disaster that AIG is.

The Bumpy Ride Ahead

Other than the very positive reaction to the new RTC, so far the market gets worse with everything the treasury does. Lets hope this latest effort actually does some good.