|
|
Who We Are
Who We Are
Subscribe Here
Is there such a thing as good debt? What do you suppose bad debt is? And
what kind do you have? Debt Special Thanks to our Online Marketing Agency, SimpleImp for their invaluable contribution to this site's continued success. I strongly suggest that if you are serious about what you do online, these are the talented people you need to contact to see your effort payoff. |
Seth wrote:
In reference to your article last month about the long bond, you didn't seem
too optimistic about its cancellation except to say that it will help the
housing market. Is there a reason for this?
Dear Seth:
The article you refer to GoodBye Long Bond, was
middle of the road when it came to optimism or pessimism. If you have no
equity in a home, the cancellation will mean nothing for you. If you are not
in a position to buy, then, likewise, the disappearance of the 30 year
Treasury Note will mean little or nothing to you. (The cancellation of the
note means that the new benchmark for the mortgage industry is the Ten Year
Note, although new isn't exactly the right word.)
But it does create problems that Mr. O'Neill, the Treasury Secretary may have overlooked.
The 30 year Treasury Note was a risk free investment and many insurance
companies used it as a hedge against long term liabilities. The note itself
has only been available since 1977 because prior to that, companies could
issue high quality bonds that investors would buy with confidence. But there
aren't that many AAA rated bonds floating around out there. That's not to say
companies aren't issuing bonds. They are, but the record number of debt
securities isn't as highly rated as investors would like to have.
It was however a good idea from the refinancing point of view, but will only
be good as long as the federal policy for money remains at ease. If they
begin to tighten, then you could probably expect the next Treasury Secretary
to reissue them.
|
