Will You Invest in the U.S. Treasury Bond?

Discussion in 'Markets & Economies' started by Cinvalo, Jun 22, 2013.

  1. Cinvalo

    Cinvalo Member

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    Source:http://www.corruptionofrealmoney.com/education.php
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    http://www.corruptionofrealmoney.com/displayfullarticles.php?id=13#.UcXXO9grqSo

    Hi Guys, I have written an article about the U.S Treasury Bond. Please discuss or criticize me. Correct me if i am wrong :)
    I am so glad that i did manage to draw some attentions and spark interests to what is going on in the market to my friends and their friends in Asia through my blog. Most of my articles focus on the fundamental so they are not intended to be difficult. I hope that with my humble knowledge and little effort, I can wake more people up to WHY they should invest in precious metals . >.<
     
  2. Old Codger

    Old Codger Active Member Silver Stacker

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    Anyone who buys a US Treasury Bond, indeed ANY government bond, is a MUG! (including the Governor of the RBA!)

    They WILL be repaid in worthless currency that will be lucky to buy you a loaf of bread.

    JMO


    OC
     
  3. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

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    You have to be careful with "Yield".

    Not all bonds are kept until maturity. Like any investment, you can liquidate your position early by selling your stake on the open market. While the interest rate of a bond is guaranteed, It is the price of the bond subsequent it's issue that drives yield.

    Let's demonstrate this with an example;

    If one of Peter's friends needs some extra cash flow, they can sell their Peter bond before maturity on eBay, Craigslist, the street corner whatever. If Peter's friend sells his Peter bond with a 10% coupon at its $1,000 par value, the yield is 10% ($100/$1,000). Pretty simple stuff. But if the seller only manages to attract $800 for his Peter Bond, then the yield (for the new bond owner) goes up to 12.5%. This happens because he's getting the same guaranteed $100 (from Peter at maturity)on an asset that he paid $800 for ($100/$800). Conversely, if the bond goes up in price to $1,200, the yield shrinks to 8.33% ($100/$1,200).

    Bond yeilds (per se' ) aren't controlled by Govts. they're essentially a market P/E ratio measure. The principal value of bonds change on the open market and are a judgment on the stability of a Govt/country.

    High yeilds can signal the market has no confidence in a Govt's monetry policy or the economy of a country. (Kyle Bass points out that the rout of cash away from Italy happened when 10 yr bonds rose just 100 basis points from 5.0% to 5.1%)

    Low Yeilds aren't a good thing either, a flood of cash into a country's bonds (driving their prinicpal price up and therefore yields down) can signal problems with other parts of a country's markets (stocks, equities and/or commodities).
     
  4. Old Codger

    Old Codger Active Member Silver Stacker

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    "Like any investment, you can liquidate your position early by selling your stake on the open market."


    IF you can find someone to buy it! On SHTF Day, there will be SFA of them.


    OC
     

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