Friday, October 29, 2010

Treasury Inflation Protected Securities

Monday's auction of Treasury Inflation Protected Securities produced an unprecedented outcome for TIPS:

The U.S. Treasury Department yesterday sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.

Negative yields in T-bills was also unprecedented until December 9, 2008.  Needless to say; negative yielding debt instruments do not signal a stabile or healthy economic outlook.

Saturday, October 23, 2010

Monetary Policy and Regulating Consumer Gift Cards

The goal of the Fed:

The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates.

Yet somehow the brain trust that is The 111th United States Congress - in their blind ignorance - believes that allocating this important organization's resources not to monetary policy, but to the regulation of consumer gift cards and credit cards:

The Federal Reserve Board on Tuesday announced a final rule implementing recent legislation modifying the effective date of certain disclosure requirements applicable to gift cards under the Credit Card Accountability Responsibility and Disclosure Act of 2009.

Saturday, October 16, 2010

Treasury Auctions and Fed Buybacks

This past week the Treasury has auctioned off:

$27 Billion in 26-week Bills on October 12, 2010
$29 Billion in 13-week Bills on October 12, 2010
$32 Billion in 3-year Notes on October 12 2010
$25 Billion in 4-week Bills on October 13, 2010
$13 Billion in 30-year Bonds on October 14, 2010

Also, the Fed has conducted a purchase of $4.69 billion in Treasury Notes on October 15, 2010.  Such Permanent Open Market Operations are described as follows:

The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).

Monday, October 11, 2010

Another New York State Failure

No surprise that New York State Governor David Paterson received an "F" from Cato Institute's 2010 Fiscal Policy Report Card on America's Governor's (page 23).

New York
David Paterson, Democrat
Legislature: Democratic
Grade: F
Took Office: March 2008

Governor Paterson has supported an enormous array of tax hikes during his short time in office. In April 2008, he signed into law a $1.7 billion tax increase, which included a $1.25 per pack increase on cigarettes, a broadening of the sales tax base, higher taxes on financial services, and higher taxes on limited liability corporations and real estate investment trusts. In December 2008, he walloped New York City workers with a $1.5 billion “mobility tax,” which is a new payroll levy to fund public transit. In 2009, Paterson approved a huge $5 billion tax increase, which included higher taxes on personal income, wine, cigars, health insurance, and utilities. The “temporary” three-year income tax hike added tax rates of 7.85 percent and 8.97 percent on top of the state’s previous top rate of 6.85 percent. In 2010, Paterson signed into law another cigarette tax increase to bring the combined state and New York City tax rate to $5.85 per pack. Paterson has also proposed new taxes on soda, health care services, and other items. You would think that with all of these tax increases, state policymakers must have first cut the budget to the bone. But the New York general fund budget has been roughly flat in recent years, not cut.