Buffett Cautions Against Buying Long Term USD Bonds

European government debt has been sold at negative interest rates recently. The United States Treasury has now come as close to that as possible with 0% 3 month T-bills in the latest auction. The incredible policies that have created such loose credit has the world so flooded with money searching for somewhere to go that 0% is seen as attractive. This excess cash is dangerous. It is a condition that makes bubbles inflate.

Submitted by Michael Pento of the Pento Report Trump’s Mandate to Yellen: Print More Money or You’re Fired! What kind of President will Donald Trump be? Will he restore America to its former position of greatness, or end up being feckless like a long list of his predecessors? That is yet to be determined.

FRANKFURT: Investors on Tuesday started paying for the privilege of owning rock-solid German government bonds as fears of a possible Brexit and economic worries caused a rush to the safety of German debt. While borrowers traditionally pay interest on the money they are loaned, in the face of heightened political and economic uncertainty, those interest rates have come down to record lows recently as investors flock to safe havens to park their cash.

Us treasury yield hit a incredibly low level years ago and they have continued to fall further. Granted this is mainly due to the bailout of the economy necessitated by the politicians favors to the too-big-too-fail financial institutions that have given those politicians so much cash over the years.

Welcome to the Curious Cat Investing and Economics Carnival: we highlight recent blog posts we found interesting.

MUMBAI: There is an eerie silence in the government bond market as things have slowed down. And, a gain in prices is not a given even if the central bank lowers rates. The question now is who would absorb the flood of bond supply that is expected to hit the market? Foreign funds have nearly used up the $30-billion investment limit set for them in government bonds. Traditionally, banks, insurers and provident funds have been the buyers, but their appetite, too, is likely to be less this time.

There is lots in the media at the moment about how interest rates on government bonds in some developed countries are dipping below zero for the first time. This is indeed an historical moment, but it reflects a 30-year trend of collapsing yields rather than a short-term phenomenon. The chart below shows the interest rates on 10-year government bonds in the US, Germany, Japan, Switzerland and Sweden from Swedish bank SEB:

Regular readers know that "bond king" Bill Gross, who runs the world's biggest fixed income fund at PIMCO, is not the biggest fan of the Federal Reserve's quantitative easing programs.