Is The Treasury’s Imminent Launch Of Floaters The Signal Inflation Is Coming?

April 11, 2012 04:05

Ironically, the very act of rolling out this product is thus the alarm bell that higher rates are a-comin’. – Zero Hedge


by Tyler Durden at Zero Hedge


the US Treasury may be telegraphing to the world that it, or far more importantly, the TBAC, is quietly preparing for a surge in interest rates. Which as everyone and the kitchen sink knows, is THE black swan event …


capital losses within the one asset that has been a cash magnet ever since the Second Great Depression, would be devastating.


Serious market turbulence might result, significantly greater than that associated with the February 1994 “surprise” rise in rates initiating a tightening cycle, were the market to believe it were embarking on a steady (or rocky) rise in rates from near zero to a “neutral” fed funds rate of 400 bps and a “normal’ 5 percent yield on 2-year U.S. Treasuries.


What happens once we get Floating Treasurys nobody knows. But if 1951 is a precedent, when the unstoppable force of central planning finally rammed right into the immovable wall that is reality, it may be time to start heading for the cliffs.




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